By Sam Boughedda
Shares of Planet Fitness (NYSE:PLNT) were upgraded to Strong Buy from Market Perform by Raymond James on Monday, with a price target of $70 per share.
An analyst explained in a note to clients that the firm's bullish stance on the shares of Planet Fitness reflects the company's highly resilient business model and value gym positioning, ample store growth opportunity, and what they believe is an attractive valuation.
"The stock is well off its highs from last fall and has been notably weak of late, underperforming the broader market despite its resilient and recession-resistant business model and our expectations for healthy growth in 2023. Further, PLNT has no interest rate risk and very little near-term debt maturities, while current valuation is well below its recent historical average," wrote the analyst.
As consumer spending is pressured, Planet Fitness could benefit from its low-cost model, a sentiment Raymond James shares.
"PLNT offers current and prospective members a low-cost model, with its Classic Card membership just $10 per month and Black Card recently increased by $2 to $24.99 per month. This is roughly in line with other value gyms such as Youfit, Crunch and 24-Hour Fitness– though with many more locations – while well below an LA Fitness or an Equinox. Underscoring this point, PLNT was able to deliver same-store sales growth in each and every quarter throughout the Great Financial Crisis of 2008-09, while putting together a streak of 53 consecutive quarters of positive comps prior to COVID," added the analyst.
Planet Fitness shares jumped more than 5% Monday.