Gymnasium revival poses a problem for at-home health shares

By Liz Moyer — Investors are beginning to wonder about the home fitness market as people return to gyms and exercise studios.

Peloton Interactive Inc (NASDAQ:PTON), perhaps the company’s biggest pandemic darling, is attempting to pull off a roller-coaster week. First, the stock rose when it emerged that it would be selling its bikes and gear through (NASDAQ:AMZN), then the stock plummeted after disappointing earnings.

Quarterly earnings fell 28% as more people than expected canceled their memberships. Peloton is in the midst of a turnaround under a new CEO and has announced job cuts, store closures and price increases to remedy the situation.

Still, Wall Street seems to see the prospect of growth. Many analysts reset their price targets lower on Friday, but many of those targets are still above Peloton’s trading price, which was around $10 per share. Deutsche Bank lowered its price target to $24 and said the latest quarter could be the bottom for the recovery to begin. But at its trading price, the target implies it could more than double.

Still, it’s not far to say that Peloton faces stiff competition from out-of-home fitness providers simply because of human nature.

Morgan Stanley said in a note last week that people are using their digital or connected home fitness products to complement, not replace, use of the gym.

Morgan Stanley found that gym members are three times more likely to subscribe to a connected bike and four times more likely to subscribe to a connected treadmill. Rather than turning gym rats into home fitness enthusiasts, Peloton is vying for their attention.

Peloton’s shares are down 70% this year, including nearly 5% on Friday.

According to Zippia, the US fitness industry’s revenue was $33.2 billion last year, and 39% of Americans are gym members.

Chris Rondeau, the CEO of Planet Fitness Inc (NYSE:PLNT), said earlier this month that the company added 300,000 net new members and ended the quarter at 16.5 million.

The story goes on

“We also believe that people will continue to prioritize their health and well-being while also being more cost-conscious and even switching from high-priced gyms to Planet when not using the basketball court, pool, daycare, etc.,” Rondeau said a conference call for the outcome.

And Xponential Fitness Inc (NYSE:XPOF) CEO Anthony Geisler also said their business has been resilient. The franchise, which includes brands like Pure Barre and Row House, said its second-quarter revenue grew 66% year over year.

Planet Fitness shares fell 3% on Friday and are down 17% this year. Xponential’s shares are down 2% on the day and are down 9% so far this year.

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