Planet Fitness (NYSE: PLNT) stock price has underperformed the market this year as the popularity of weight loss drugs increased. It has crashed by 16.5% in the past 12 months and by 10.7% this year. The S&P 500 index has risen by 27% in the past year and by almost 10% this year.

Planet Fitness share price has been affected by the popularity of weight loss drugs in the US. The most popular of these drugs are the likes of Ozempic, Mounjaro and Wegovy. More drugs are being developed by companies like Viking Therapeutics, Amgen, and Roche.

The theory is that people using these drugs will mostly not have a need for the services provided by Planet Fitness and other gym companies. 

Still, despite these trends, Planet Fitness’s business is doing well. The most recent results showed that the company’s total revenue rose by 1.4% to $285 million as the same-store sales rose by 7.7%. Its net income for the quarter came in at $35.3 million.

Planet Fitness’s annual revenues rose by 14.4% in 2023 to over $1.1 billion. Its net income stood at $147 million as the company added 165 new fitness stores, bringing the total number to 2,575.

The company expects that its growth will continue, albeit at a slower pace this year. It sees its revenue rising by between 6% and 7% while its net income will rise by between 9% and 11%.

Planet Fitness can weather the weight loss drugs storm because of how it makes money. It generates most of its money from equipment sales, franchise fees, and advertising. These figures account for almost 60% of the total revenue. The rest comes from company-owned stores.

Planet Fitness share price is lagging because of the ongoing boycott from conservatives who criticised its transgender policy. These boycotts have sent memories of last year’s AB InBev, the giant alcoholic beverage company.

Further, Planet Fitness carries substantial debt. It has almost $2 billion in total debt and is spending over $70 million in interest payments this year.

Analysts have a favourable view of Planet Fitness. 10 of the 11 analysts covering the company have a buy or strong buy rating. 

Morgan Stanley has an overweight rating while RBC Capital, Stiffel, and Morgan Stanley have a positive view. The average price target is $75.25, which is much higher than the current $65.14.

The PLNT stock price has bounced back in the past few weeks. It has jumped from a low of $54.40 on March 21st to a high of $65.10. The stock has risen above the 50-day and 25-day Arnaud Legoux Moving Averages (ALMA).

Further, the Relative Strength Index (RSI) has moved above the neutral point. The same is true with other oscillators like the MACD and the Stochastic Oscillators have also pointed upwards.

Planet Fitness stock has also formed a small inverse head and shoulders pattern. Therefore, the outlook for the stock is mildly bullish, with the next point to watch will be at $70. The stop-loss of this trade is at $60.

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