Gym Revival Poses Challenge to At-Home Fitness Stocks

© Reuters

By Liz Moyer

AiVIF.com -- Now that people are returning to gyms and workout studios, investors have started to wonder about the market for at-home fitness.

Peloton Interactive Inc (NASDAQ:PTON), perhaps the biggest pandemic darling of the group, is trying to put a roller coaster week behind it. First, the stock surged when word came out it would sell its bikes and gear through Amazon.com (NASDAQ:AMZN), then the stock plunged after disappointing earnings.

Quarterly revenue fell 28% as more people than anticipated quit their memberships. Peloton is in the middle of a turnaround under a new chief executive, and has announced job cuts, store closings and price increases as a way to set things right.

Still, Wall Street seems to see the prospect for 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 a share. Deutsche Bank, cutting its target price to $24, said the recent quarter could be the bottom point at which the rebound can start. But at its trading price, the target implies it could more than double.

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

Morgan Stanley in a note last week said contrary to what everyone thinks, people use their at-home digital or connected fitness products as an add-on to gym usage, not a replacement.

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. So rather than converting gym rats to home fitness enthusiasts, Peloton finds itself competing for their attention.

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

The U.S. fitness industry’s revenue was $33.2 billion last year, according to Zippia, and 39% of Americans have gym memberships.

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

“We also believe that people will continue to prioritize their health and wellness while being more cost conscious, even trading down to Planet from high-priced gyms if they're not using the basketball court, the pool, day care, etc.,” Rondeau said on an earnings conference call.

And Xponential Fitness Inc (NYSE:XPOF) CEO Anthony Geisler also said their business has been resilient. The franchise company with such brands as Pure Barre and Row House said second quarter revenue jumped 66% from last year.

Shares of Planet Fitness fell 3% on Friday and are down 17% this year. Shares of Xponential were down 2% for the day and are off 9% so far this year.