Planet Fitness (PLNT)

Planet Fitness is a high quality, asset light, gym franchise business that has been impacted by COVID. We think it falls into the camp of ‘strong get stronger’ as much of the fitness industry is in disarray.

• 90% recurring revenuesFranchisees make a 20-30% pre-tax IRR, after paying a 7% royalty to PLNT, as well as sharing marketing costs.

• Marketing spend is a major differentiator and competitive advantage for PLNT enabled by high store Ebitda margins. (~40%)

Health and wellness likely to be a strong tailwind as the economy opens up. We would argue that high fixed costs and a history of strong SSS growth gives ample scope for beating EBITDA and EPS expectations over the next few years. This will be driven by a cyclical recovery in members, along with an acceleration in new store openings.

Potential Upside: $113 (+45%) over two years, 20% IRR

Sensible Downside: $68 (-13%)

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