The current earnings season is not over yet, but Planet Fitness (NYSE: PLNT) is on track to become one of the most notable stocks of this period.
Gym stocks, which were already down significantly for the year, lost nearly a third of their value following the release of first-quarter earnings on Thursday. Cuts to its sales and profit forecasts, as well as management’s decision not to raise the price of its premium Black Card membership, appeared to spook investors. The stock is down about 58% so far this year.
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That may leave investors wondering what to do. Should they buy Planet Fitness or stay away from what has suddenly become an even more volatile stock?
What happened
At first glance, Planet Fitness’ earnings report looked solid. Revenue increased 22% year over year to $337 million. Furthermore, even with a 101% increase in cost of revenue amid higher marketing spending and operational challenges, its net income increased 23% to $52 million.
Still, the cost of revenue quickly became a concern. In addition to the decision to keep the cost of Black Card membership stable, new member signups fell 36% year over year and the company increased marketing spending.
Accordingly, it adjusted its expected 2026 revenue growth to 7%, down from a previous forecast of 9%. It also forecast a net income decline of 2%, in contrast to its previous guidance of a 4% to 5% increase.
The new state of Planet Fitness shares
However, the share price drop seems like an overreaction, and not just because it’s at its lowest levels since 2020. The trailing P/E ratio is now at 17, and its forward P/E has dropped to 13.
This type of stock behavior appears to be discounting the premise of a permanent slowdown in Planet Fitness’s business, and it’s too early to say if that’s what’s happening.
Admittedly, with stocks hammered this year, CEO Colleen Keating’s leadership may face a test. Additionally, Planet Fitness has traditionally been the budget-conscious consumer’s gym, a factor that could make it difficult for the company to raise prices.
Still, the company expects between 180 and 190 new club openings, a significant addition for a company with 2,909 locations as of March 31. Additionally, another 150 to 160 franchisee-owned locations are expected to purchase new equipment, likely increasing their competitiveness.