What is Happening with Planet Fitness, Major Stock Price Declines

Planet Fitness has quite a unique Business Model, when compared to competitors. As a Member of a Franchise, and former member of other Gyms, I can say from experience, "It's quite obvious that Planet Fitness is trying to attract the common person, as a member". This is where their Business Model is obvious. You will find more floorspace is occupied by Treadmills, Bikes, and Stair Steppers than Weights. Also, their Weights are lighter. They don't have massive dumbbells and plates. There are no flat benches for Chest Presses. Nor is there a Preacher Curl Station. There are Smith System Stations with Benches and fixed Curl Stations. Not ideal for the typical Steroid User/Bodybuilder. Not ideal at all, but it is cheap. Plans starting at only $10 per month!

What is their Business Model?

Planet Fitness operates on a franchise business model. It aims to provide a non-intimidating and supportive environment for fitness enthusiasts at an affordable price. The company’s mission is to enhance people’s lives by offering a high-quality fitness experience in a welcoming atmosphere, which they call the "Judgment Free Zone". Planet Fitness had approximately 15.2 million members as of 2021.

The company’s fitness centers are typically bright, clean, and span around 20,000 square feet. They offer a wide selection of high-quality cardio, circuit, and weight-training equipment, along with friendly staff trainers. Planet Fitness provides unlimited free fitness instruction to all members through the PE@PF program.

Planet Fitness offers a standard membership priced at $10 per month. This attractive value proposition is designed to appeal to a broad population, including occasional gym users and those who do not belong to a gym. The company’s addressable market is significantly larger than the traditional health club industry, estimated to be around 250 million people in the United States over the age of 14.

To facilitate rapid expansion, Planet Fitness relies on its franchise system. As of December 31, 2021, there were 2,142 franchised Planet Fitness stores operated by approximately 120 franchisee groups.

The company generates revenue through multiple streams, including membership fees and in-club services. By focusing on affordability and creating a judgment-free environment, Planet Fitness has successfully positioned itself as one of the largest and fastest-growing franchisors and operators of fitness centers in the United States.

For more information about Planet Fitness’s business model, you can read here.

Why Was There a Big Sell Off in PLNT Stock?

Planet Fitness’ stock price dropped by 15% on Friday, reaching its lowest price since August 2020. This sudden drop was due to the ouster of CEO Chris Rondeau by the board of directors. The stock price fell to approximately $50 on Friday morning. The company’s decision to transition to new leadership led to this significant decline in stock value.

For more details on Planet Fitness' CEO Transition, you can refer to this news articles.

Craig R. Benson, a member of the Company’s Board of Directors, has been appointed Interim Chief Executive Officer, effective immediately. Benson’s appointment follows the decision by the Board to transition to new leadership, resulting in Chris Rondeau’s departure as the Company’s CEO. Rondeau will continue to serve as a member of the Company’s Board of Directors and will be nominated for re-election at the Company’s 2024 Annual Meeting. The Board is engaging a leading executive search firm to assist in a comprehensive search process to identify a permanent CEO, with both internal and external candidates being considered.

Why I Like Planet Fitness, and Like it More at a Discount?

Besides their footprint, rapid Membership Growth and Business Model...  The Companies Net Income continues to outpace Debts, substantially. The past five Quarterly Reports indicated Net Income, in the Millions to be (Descending left to right): $41, $23, $34, $27, and $22. Annual Net Income was reported in the Millions as; $99, $43, -$15, $118, $88, $33, $22, $19, $37, and $25. Meanwhile, Debt was reported in the Millions as; $3,066, $2,659, $2,555, $2,425, $1,736, $1,229, $1,216, $700, $450, $240. I recognize that Net Income Growth to Debt Growth has changed trends. Income is growing faster than Liabilities, a measure I apply to Investments. 

Fundamental Analysis screams stay away. Assets are less than half of the Market Cap. Likely a result of their Business Moel. Debt to Equity is Negative, and their Debt to Income is 30.97. It will take nearly 31 years of Income to pay off debt.

With a Beta of 1.30, a seismic move like a CEO Transition, and an Average Price Variance of $1.89 (Intraday over 90 Days), I see this is as a Swing Trade opportunity. My target for Swing Trades has long been 1% and this Stock's Buyers and Sellers easily met that target over the past 90 days. Previous 90 Day, Avg High of $63.56 and Avg Low of $62.01, my entry for Swing Trades is below $62.79.