Baird analysts revealed in a note Monday that they have added Planet Fitness (NYSE:PLNT) as a "Bullish Fresh Pick," signaling optimism about the company's prospects as it heads into 2025.
Despite the stock's significant rise from early 2024 lows, it has lagged behind the broader market year-to-date, gaining just 10% compared to the S&P 1500's 17%.
However, Baird believes that Planet Fitness is well-positioned to thrive in a slowing growth environment, thanks to recent strategic changes and the potential for lower interest rates and reduced building costs.
"We are highlighting PLNT as an attractive idea for a slowing growth environment," they wrote.
According to Baird, new leadership at Planet Fitness has effectively addressed unit economic challenges by implementing pricing adjustments, reducing capital expenditures, and extending re-equipment and remodeling timelines.
These actions are said to have helped restore return on invested capital (ROIC) to near pre-COVID levels. Baird also highlights the new CEO, Colleen Keating, who is focusing on enhancing leadership, improving member experience, and upgrading marketing strategies to drive faster growth.
Looking ahead to 2025, Baird sees multiple fundamental drivers that could boost Planet Fitness’s performance, particularly in marketing. After a disappointing Q1 2024, the company is expected to revamp its marketing approach, leveraging its substantial $300 million annual budget to better communicate its value proposition.
Analysts note that additional drivers include continued pricing adjustments, loyalty programs, new service offerings, and favorable industry tailwinds.
Baird maintains its Outperform rating on Planet Fitness, noting that its strong consumer value proposition, high-margin franchised model, and growing cash return capacity position the stock well for the future.
If these factors, combined with potential lower rates and building costs, lead to accelerated unit growth, the firm believes the stock could reach $100 per share, offering attractive upside potential for investors.