Raising prices in this environment is something of a grim necessity, even if it is a problem waiting to happen. That’s what’s going on at Planet Fitness (NYSE:PLNT), the gym chain that announced its first price hike since 1998. That was news enough to send shares slipping, though only fractionally, in the closing minutes of Friday’s session.
The new price for a basic membership at Planet Fitness is now $15, whereas previously, it had been just $10 for the month’s membership. Current members will be grandfathered in until their current membership runs out. And even then, the impact of the fee hike likely won’t be much help for a while, noted CFO Tom Fitzgerald, who noted that the price increase would only come on the lowest-tier members. Given that over 60% of new memberships join at the “Black Card” tier—which opens up access to multiple locations—the modest, if large on a percentage basis, hike may not have that great an impact.
Declining Urgency
Planet Fitness has been struggling to bring in new members for some time now, and that’s not great news, given how many members it’s lost already. The recent issue of allowing a transgendered male to use a women’s locker room left many outraged, and many of those outraged are no longer paying customers of Planet Fitness. Some of them were thrown out outright, while others voluntarily left in solidarity with the dispossessed. New memberships have started to make a comeback; however, there’s almost an equivalent amount of memberships being canceled, making the newcomers’ impact limited.
Is Planet Fitness Stock a Good Buy?
Turning to Wall Street, analysts have a Strong Buy consensus rating on PLNT stock based on 11 Buys and three Holds assigned in the past three months, as indicated by the graphic below. After a 6.15% loss in its share price over the past year, the average PLNT price target of $73.50 per share implies 7.23% upside potential.
