The current earnings season is not over yet, but Planet Fitness (NYSE: PLNT) is on track to become one of the more notable stocks of this period.
The gym stock — which was already down significantly for the year — lost almost one-third of its value following its first quarter earnings release Thursday. Cuts to its sales and earnings guidance, as well as management’s decision not to increase the price of its premium Black Card membership, appeared to spook investors. The stock is now down by about 58% year to date.
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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’s earnings report appeared solid. Revenue was up 22% year over year to $337 million. Also, even with a 101% increase in the cost of revenue amid higher marketing spending and operational challenges, its net income surged 23% higher to $52 million.
Still, the cost of revenue quickly became a concern. On top of the decision to hold the cost of the Black Card membership steady, new member sign-ups fell by 36% year over year, and the company increased marketing spending.
Consequently, it adjusted its expected 2026 revenue growth to 7%, down from a previous forecast of 9%. It also forecast a 2% net income decrease, in contrast to its previous guidance for a 4% to 5% increase.
The new state of Planet Fitness stock
Nonetheless, the plunge in the stock price looks 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 is down to 13.
This sort of stock behavior seems to be pricing in the premise of a permanent slowdown in Planet Fitness’ business, and it is too early to tell whether that is what’s happening.
Admittedly, with the stock being hammered this year, CEO Colleen Keating’s leadership may face a test. Also, Planet Fitness has traditionally been the gym of the budget-conscious consumer, a factor that could make it harder 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. Also, another 150 to 160 franchisee-owned locations are expected to buy new equipment, likely boosting its competitiveness.
