Things are finally getting back to normal. People are emerging from quarantine, visiting local restaurants, working out at gyms and enjoying life once again. Though some will continue their at-home workouts, the majority of those who previously exercised at fitness centers will find their way back to the local fitness center in the months ahead.
Gym membership will likely decline as social distancing is encouraged yet the majority of these facilities will remain in business. In other words, this might be the optimal time to invest in fitness-related businesses ranging from gyms to companies that sell athletic gear. After all, human beings are social animals who gravitate toward social centers including gyms.
Lululemon (LULU), Planet Fitness (PLNT) and Town Sports International (CLUB) should benefit from the reopening of the economy.
It is quite interesting that a handful of stocks in the fashion/apparel segment have ascended amidst the coronavirus outbreak. Consumers purchase garments from LULU with the goal of looking stylish and feeling comfortable while working out at the gym. However, LULU has soared even while gyms were shuttered.
The POWR Ratings could not be better for LULU: an A overall rating with As in all POWR Components but for industry rank. The analysts have set a high price target of $378 for LULU. People will soon head back to the gym, campuses and other public spaces, meaning LULU’s comfy and stylish gear will undoubtedly be in demand.
LULU’s spike in online sales combined with its stronger than expected in-store sales at brick-and-mortar locations just might help the stock generate more than a billion dollars in cash flow in 2020. The only question is whether LULU gear will still be considered chic and stylish in the years and decades to come.
Planet Fitness (PLNT)
The average person is tired of working out alone at home. Exercising proves easier and more effective when performed in the company of others. Furthermore, there is only so much space in the house for fitness equipment. PLNT will receive a steady inflow of customers as the economy reopens.
Though some weary fitness enthusiasts will delay their re-entry into PLNT facilities, the vast majority will head back to the gym in the months ahead. The primary risk in investing in PLNT is a potentially nasty second wave of coronavirus spreading across the land. However, if you believe a second wave of the virus won’t phase the masses or that a significant second wave will not occur, you stand to benefit from the 15.5 million PLNT members returning to its 2,000+ sites throughout North America and beyond.
It is important to note membership levels have held steady at PLNT sites that have reopened. PLNT’s low cash burn rate makes it clear the company can withstand the coronavirus pandemic, even if a second wave occurs.
PLNT has an average analyst price target of $76.50, with eight analysts recommending investors buy the stock and three recommending investors hold. No analysts advise selling PLNT. The POWR Ratings are quite favorable to PLNT with an overall B rating highlighted by an A Trade Grade and a three-year price return of 227.58%.
Town Sports International (CLUB)
The coronavirus outbreak has reshaped society yet it has also provided countless attractive investment opportunities. If you are not invested in gyms and fitness-related businesses, this just might be the right time to establish a position in CLUB. CLUB owns and operates fitness centers in the mid-Atlantic and northeastern parts of the United States as well as a couple locations in Switzerland.
CLUB’s one-month price return is nearly 130%. Its three-month price return is in excess of 30%. Priced at nearly $14 back in the summer of ‘18, CLUB has since dropped quite precipitously. However, Zacks rates CLUB as an “A” for value so investors looking to roll the dice should consider taking a flyer on this beaten-down stock.
Look for CLUB to spike in the short-term as the economy resumes regular activity.
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About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More…
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