On Tuesday, RBC (TSX:RY) Capital Markets adjusted its outlook on Planet Fitness (NYSE:PLNT), increasing the price target to $80 from the previous $74 while retaining an Outperform rating on the stock. The firm revised its financial model for the fitness center operator, which led to a change in both earnings per share (EPS) projections and the valuation multiple applied to the company's earnings before interest, taxes, depreciation, and amortization (EBITDA).
The updated model now includes EPS estimates of $2.45 for the year 2024, a slight decrease from the prior estimate of $2.49, and an EPS estimate of $2.93 for 2025, up from the previous $2.87. This revision reflects RBC Capital's latest analysis and expectations for Planet Fitness's financial performance in the coming years.
In addition to the EPS adjustments, RBC Capital also altered its EBITDA forecast for 2024, now expecting $476.6 million, which is an increase from the former projection of $469.8 million. This upward revision in EBITDA estimates contributes to the raised price target for Planet Fitness shares.
The new price target of $80 is based on a multiple of 16 times the firm's 2025 adjusted EBITDA estimate of $548 million. This is a change from the previous valuation, which applied a 17.5 times multiple to a lower adjusted EBITDA estimate of $470 million for 2024. The Outperform rating indicates that RBC Capital continues to view Planet Fitness shares favorably in relation to market performance.
As a final note, the analyst from RBC Capital emphasized the updated financial model and the rationale behind the new price target, stating that the adjustments reflect a comprehensive analysis of Planet Fitness's expected financial outcomes. The firm's positive outlook on the stock remains intact, as evidenced by the maintained Outperform rating.
InvestingPro Insights
Following the optimistic outlook from RBC Capital Markets on Planet Fitness (NYSE:PLNT), recent data from InvestingPro provides additional context to the company's financial health and market position. With a market capitalization of $5.41 billion and a P/E ratio of 38.15, Planet Fitness is trading at a high earnings multiple, which often indicates strong investor confidence in the company's growth potential.
The company's revenue growth over the last twelve months as of Q4 2023 stood at 13.95%, showcasing a robust expansion in its financial performance. Additionally, the gross profit margin during the same period was an impressive 55.69%, reflecting the company's ability to maintain profitability despite operational costs.
One of the InvestingPro Tips suggests that Planet Fitness's stock is currently in oversold territory according to the Relative Strength Index (RSI), which could imply a potential rebound in the share price for investors who are monitoring technical indicators. Moreover, the company has been profitable over the last twelve months and analysts predict it will be profitable this year as well, reinforcing the positive sentiment echoed by RBC Capital Markets.
For those interested in a deeper analysis, there are additional InvestingPro Tips available, including insights on earnings revisions, liquidity, and valuation multiples. To access these tips and more, visit InvestingPro and consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. Currently, there are 9 additional tips listed on InvestingPro that could provide further guidance for your investment decisions.
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