Fitness Stocks: 7 Fitness Stocks Hoping to Take Peloton’s Crown

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With larger well being consciousness than ever earlier than, health shares have been among the many key funding themes previously 12 months. This consists of at-home health firms, gyms and firms offering numerous sports activities and health gear.

One identify that deserves point out is Peloton Interactive (NASDAQ:PTON). Throughout the identical interval final 12 months, PTON inventory was buying and selling at $42.80. With sturdy progress in income, the corporate’s inventory surged by 300% to highs of $171.

Nonetheless, the corporate has been embroiled in controversy, and the inventory has slumped by 44% to present ranges of $94. Let’s first speak concerning the controversy.

On April 17, the U.S. Shopper Product Security Fee warned consumers against using Peloton Tread+. The CPSC cited incidents on kids changing into entrapped, pinned and pulled beneath the rear curler of the product. On the identical day, Peloton refuted the claims as misleading and inaccurate. Nonetheless, on Could 5, the corporate introduced the voluntary recall of Peloton’s Tread+ and Tread treadmills.

Moreover impacting progress within the close to time period, the incident has dented Peloton’s credibility. It would take time to rebuild shopper confidence.

This presents a chance for different health firms to extend their market share. The house health gear market was value $16.4 billion in fiscal 12 months 2020. Over the subsequent 5 years, the market is likely to grow at a compound annual growth rate (CAGR) of 2.75%.

Let’s talk about seven health shares which might be hoping to take Peloton’s crown.

  • Nautilus (NYSE:NLS)
  • Planet Health (NYSE:PLNT)
  • WW Worldwide (NASDAQ:WW)
  • Dick’s Sporting Items (NYSE:DKS)
  • Lululemon Athletica (NASDAQ:LULU)
  • Forest Highway Acquisition (NYSE:FRX)
  • Nike (NYSE:NKE)

Health Shares: Nautilus (NLS)

two black and red dumbbels sit on the floor

Supply: Shutterstock

As I write on NLS inventory, the corporate has reported sturdy earnings for the primary quarter of 2021. Even after an upside of over 176% in a single 12 months, the inventory appears engaging.

For Q1 2021, the corporate reported income progress of 119.9% on a year-over-year foundation to $206.1 million. Progress was triggered by sturdy demand for linked health bikes and treadmills.

One other necessary issue, which might set off inventory upside, is the corporate’s enchancment in earnings earlier than curiosity, taxes, depreciation and amortization (EBITDA). For Q1 2021, EBITDA was $40.4 million, which suggests an EBITDA margin of 19.6%. On a year-over-year foundation, EBITDA margin enlargement was 1,710 foundation factors. Due to this fact, as income progress sustains, the corporate is well-positioned to ship strong money flows.

Nautilus additionally has formidable long-term progress plans. The corporate goals to achieve a turnover of $1 billion by FY2026. At present, the corporate is targeted on enhancing the digital transformation plan. The goal is to have 250,000 members by FY2022. Moreover, the corporate is focusing on two million members by FY2026. The digital subscription enterprise is more likely to contribute to twenty% of complete income by that 12 months.

Contemplating the expansion plans, NLS inventory may nonetheless be on the early stage of a long-term rally. With low debt and ample liquidity, the corporate is positioned for aggressive innovation-driven progress.

Planet Health (PLNT)

A Planet Fitness (PLNT) exterior in Roseville, Minnesota.

Supply: Ken Wolter / Shutterstock.com

The vaccination rollout in the US has been aggressive. In response to the Facilities for Illness Management and Prevention, 35% of the U.S. population has been fully vaccinated. Moreover, 46% have acquired not less than one dose. This places the U.S. on path for normalizing actions within the coming quarters.

Due to this fact, it is smart to contemplate publicity to health shares that run on a brick-and-mortar mannequin. PLNT inventory is engaging at present ranges of $75. Yr-to-date for FY2021, the inventory is mainly flat. A breakout on the upside appears imminent contemplating the reopening of the financial system.

The corporate ended Q1 2021 with complete variety of members at 14.1 million. For every month of the quarter, the corporate experienced sequential net member growth. That is an early indication of the purpose that persons are returning to gyms.

For Q1 2021, the corporate reported income decline of 12.1% on a year-over-year foundation to $111.9 million. For a similar interval, adjusted EBITDA declined by 6.1% to $43.7 million. Clearly, income and EBITDA decline has decelerated on a sequential foundation. It appears probably that the corporate will probably be again on a progress trajectory within the subsequent one or two quarters.

WW Worldwide (WW)

Indianapolis - Circa August 2020: WW International studio, formally Weight Watchers location.

Supply: Jonathan Weiss / Shutterstock.com

WW inventory is one other identify amongst health shares that deserves a glance. Specifically, at a ahead price-to-earnings (P/E) ratio of 23, the inventory appears engaging.

As an summary, WW Worldwide is a supplier of weight-management services and products. With individuals more and more staying at dwelling in the course of the pandemic, the issue of weight problems has been aggravated within the U.S.

Due to this fact, WW Worldwide is more likely to witness sustained progress in memberships. As a matter of truth, the corporate ended Q1 2021 with “5.0 million subscribers, document digital subscribers, and member retention remaining at an all-time high of over 10 months.”

Nonetheless, it’s value noting that the variety of digital subscribers was primarily flat on a year-over-year foundation. I imagine that that is more likely to change within the subsequent few years. A key purpose is the launch of FY2022 meals innovation. In response to the corporate, “clinical trials are underway, and launch and advertising and marketing plans are in improvement.”

This evidence-backed food-innovation program for wellness and weight reduction is more likely to drive important membership progress. Additional, the corporate additionally plans to expand into the healthcare and diabetes market. General, WW inventory look engaging on the present P/E, contemplating the potential progress acceleration within the subsequent few years.

Dick’s Sporting Items (DKS)

An image of a Dick's Sporting Goods retail location

Supply: Jonathan Weiss / Shutterstock.com

DKS inventory has trended larger by 66% within the final six months. At a ahead P/E of 17.24 and with a dividend yield of 1.65%, the inventory nonetheless appears engaging.

Dick’s is a retail operator that gives sporting items gear, health gear and golf gear, amongst others. Because the financial system emerges from the Covid-19 pandemic, the demand for sports activities good is more likely to speed up. The inventory has been trending larger discounting this issue.

One purpose to love Dick’s is a gradual transfer towards omni-channel gross sales. For FY2020, the corporate reported income of $9.58 billion, which was larger by 9.5% on a year-over-year foundation. E-commerce gross sales, nevertheless, surged by 100% to $2.8 billion. This translated into 9.9% progress in identical retailer gross sales.

The corporate believes that the U.S. sporting items market is value $120 billion. Additional, there was a fourfold progress in well being and health app downloads in FY2020, as in comparison with the earlier two years. This pattern is optimistic for the corporate as persons are more and more health-conscious.

From a monetary perspective, the corporate reported $1.7 billion in money and $1.9 billion in credit score facility. This offers the corporate ample monetary buffer for progress and shareholder worth creation. Dividends are additionally more likely to maintain and develop.

Lululemon Athletica (LULU)

A close-up picture of the Lululemon (LULU) sign in the Hong Kong airport.

Supply: Sorbis / Shutterstock.com

LULU inventory is down about 7% within the final six months. The corporate is one other identify within the health section that deserves a point out. And the inventory appears poised for upside within the coming quarters.

It’s value noting that the corporate is primarily within the enterprise of athletic attire and footwear. Nonetheless, in June 2020, the corporate acquired dwelling health innovator, Mirror.

Mirror is an “interactive workout platform that options dwell and on-demand courses.” Within the present instances, at-home health has gained traction, and the acquisition might create worth within the long-term. The acquisition additionally makes it clear that the corporate is trying to unfold its wings past simply health retail items.

For This fall 2020, the corporate reported gross sales progress of 23.8% to $1.7 billion. Moreover a rise in direct-to-consumer web income, sturdy numbers from Mirror had been the important thing set off for progress. It’s additionally value noting that the corporate’s e-commerce revenue totaled $899.5 million, which was 52% of complete income. The way forward for retail enterprise is omni-channel, and Lululemon appears well-positioned on that entrance.

In response to BTIG analyst Camilo Lyon, LULU stock has a price target of $434. This means a possible upside of 41% from present ranges of $308.

Forest Highway Acquisition (FRX)

Healthy food including salmon, almonds, garlic, broccoli, avocado, and lettuce

Particular objective acquisition firms (SPACs) have continued to offer engaging funding alternatives. FRX inventory is value contemplating amongst health shares.

In February 2021, Beachbody LLC and Myx Health LLC announced a three-way merger with Forest Road. The mixed entity can have enterprise presence in digital health streaming and diet options.

For FY2020, the pro-forma income is anticipated at $893 million, with dietary merchandise being the biggest income contributor. By FY2025, the company has guided for revenue of $3.3 billion. Additional, adjusted EBITDA is anticipated at $532 million for FY2025.

The corporate is focusing on 3.7 million digital subscriptions in FY2021. As digital subscriptions develop, its probably that EBITDA and money circulation will probably be strong.

It’s additionally necessary to say that the merger is at a pro-forma enterprise worth of $3 billion. This may be at 2.2 instances FY2022 income. Due to this fact, valuations appear engaging, and FRX inventory is value contemplating at present ranges.

After the SPAC enterprise mixture, the corporate additionally intends to pursue opportunistic merger and acquisition alternatives. The goal enterprise consists of dietary dietary supplements and worldwide digital health manufacturers. Due to this fact, the corporate can use the inorganic path to speed up progress.

Nike (NKE)

a stack of red Nike (NKE) shoe boxes

Supply: mimohe / Shutterstock.com

Within the health area, NKE inventory is one other engaging guess. Even for Nike, one of many progress triggers is digital gross sales. For Q3 2020, the corporate reported 59% improve in digital gross sales as in comparison with 3% progress in total income.

Earlier this 12 months, the Nike app was ranked No. 12 by variety of downloads in Apple’s App Retailer. The app provides a mix of content and personalized commerce. The recognition of the app is a sign of the corporate utilizing buyer engagement to drive gross sales progress.

One other necessary level to notice is that for Q3 2020, the corporate reported sales growth of 51% in Greater China. Even amid intense competitors from native gamers, the market is massive and might drive long-term income progress.

Coming again to the digital platform, the Nike Coaching Membership app has 185 free on-demand exercises led by Nike’s Grasp Trainers. The app additionally has a premium version that costs $14.95 per month. This may not have a major affect on income, however it does affect digital gross sales progress.

General, NKE inventory is among the many prime health shares to contemplate. Within the final six months, the inventory has moved larger by about 6%. The present consolidation is perhaps accumulation alternative.

On the date of publication, Faisal Humayun didn’t have (both instantly or not directly) any positions in any of the securities talked about on this article.

Faisal Humayun is senior analysis analyst with 12 years of trade expertise within the area of credit score analysis, fairness analysis and monetary modelling. Faisal has authored over 1,500 inventory particular articles with give attention to the expertise, vitality and commodities sector. 



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