Planet Fitness, Newington, New Hampshire, is expected to debut on the New York Stock Exchange Thursday under the 'PLNT' symbol.
Planet Fitness estimates it will receive profits of $128.3 million from the initial public offering (IPO), offering 13.5 million shares of Class A stock between $14 and $16 per share. Planet Fitness, which operates over 1,000 clubs with an estimated 7.1 million members, filed for the IPO in June and set the share offering price last week.
"I think it's going to be well received in the market," JMP Group President and Co-Founder Carter Mack said Thursday during an interview on Bloomberg Markets (watch at the bottom of this page).
New Constructs investment researcher David Trainer countered Mack's optimism on Seeking Alpha, which gave Planet Fitness a neutral rating and advised caution for potential investors.
Planet Fitness is misleading investors by reporting overstated profits by exploiting pre-IPO reporting loopholes, Trainer wrote in explaining the rating. Most of the future cash flow growth potential is already priced into the IPO price, and Planet Fitness lacks differentiation and barriers-to-entry needed to sustain growth were also listed as factors in the rating, Trainer wrote.
Trainer also questioned Planet Fitness' ability to maintain current profit margins reflected in the $14 per share price. Planet Fitness stock is more likely worth $6 per share today, he wrote, claiming Planet Fitness' ability to maintain a pretax profit margin of 15 percent is an unlikely scenario when the average fitness center margin is 9 percent.
Planet Fitness believes it is a market leader with a differentiated member experience, a nationally recognized brand and a scale advantage, according to its IPO filing. Growing club count across a range of markets is one key to Planet Fitness' growth strategy, and it believes it can have over 4,000 stores in the United States.
Another key is driving revenue growth in system-wide same store sales by attracting new members to existing Planet Fitness clubs, where base membership is $10 per month. The company expects to drive sales further by converting existing members into the premium PF Black Card Membership ($19.95 per month), which offers additional club amenities and affinity partnerships with national retail brands.
Planet Fitness reported average monthly dues per member of $15.45 and total revenue of $279.8 million in 2014.
"Planet Fitness is tapping into a rising tide of interest in small facility fitness centers," Bruce Cohen told Investor's Business Daily.
Cohen is a senior partner leading the retail private equity and strategy practice at Kurt Salmon, a global management and strategy consulting firm.
"Planet Fitness is really great at lowering the barriers for people who are interested in fitness but don't want to be intimidated by being in a large gym," Cohen said.