Urbanization And Wellness Trends Will Redefine Budget Fitness Markets

Key Takeaways

• Strong brand, pricing power, and growing younger member base set the stage for accelerated revenue growth and market share gains over boutique and high-cost gyms.
  
• International expansion and improved franchisee economics support a sustained, asset-light growth trajectory, positioning for higher margins and long-term earnings potential.
  
• Increased member churn, market saturation, rising costs, and shifting consumer preferences threaten Planet Fitness' recurring revenue, margin stability, and long-term growth prospects.

Catalysts

Planet Fitness, Inc., together with its subsidiaries, franchises and operates fitness centers under the Planet Fitness brand.

• Analyst consensus sees enhanced club-level returns from reduced build costs and higher Classic Card pricing, yet with robust Black Card penetration, demonstrated pricing power, and likely Black Card price increases, Planet Fitness could see a dramatic acceleration in blended average revenue per member and systemwide net margin expansion well beyond current expectations.
  
• Analysts broadly expect accelerated club openings (160-170 in 2025), but improving franchisee unit economics, shrinking build costs, and greater availability of retail space could return Planet Fitness to pre-pandemic growth rates of more than 200 net new units annually, driving compounding top-line and royalty revenue far above consensus.
  
• Planet Fitness is uniquely positioned to capitalize on dramatic increases in health and wellness prioritization among younger generations, as evidenced by continuously rising Gen Z and Gen Alpha engagement, which could structurally boost membership penetration and grow the addressable market, resulting in multi-year, outsized revenue and member growth.
  
• The rapid ramp of international markets like Spain, with new clubs matching U.S. performance in just one year, suggests Planet Fitness can replicate its high-margin, asset-light franchise model worldwide, unlocking a step-change in royalty and equipment revenues at higher incremental margins.
  
• Shift in consumer preference toward affordable fitness combined with Planet Fitness' unmatched brand awareness and "Judgement Free" positioning provides a powerful, durable moat, enabling sustained market share gains from higher-cost and boutique gyms, which could result in structurally higher long-term earnings power and free cash flow than currently modeled.

Planet Fitness Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Planet Fitness compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Planet Fitness's revenue will grow by 14.1% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 16.1% today to 18.9% in 3 years time.
• The bullish analysts expect earnings to reach $329.8 million (and earnings per share of $3.98) by about August 2028, up from $189.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 50.1x on those 2028 earnings, up from 46.8x today. This future PE is greater than the current PE for the US Hospitality industry at 22.2x.
• Analysts expect the number of shares outstanding to decline by 0.79% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.19%, as per the Simply Wall St company report.

Planet Fitness Future Earnings Per Share Growth

Risks

• The nationwide rollout of online cancellation functionality has led to higher-than-expected member attrition, with management acknowledging that churn has risen and may remain slightly elevated, potentially resulting in lower recurring membership revenue and exerting pressure on net margins.
  
• As franchisee white space in the U.S. diminishes and system M&A activity consolidates locations among existing owners, the company faces increasing saturation in its franchise model, which may meaningfully slow new unit expansion and long-term revenue growth.
  
• A heavy reliance on cost-conscious, lower-income customers heightens vulnerability to broader economic downturns, given that this demographic is more likely to cancel discretionary subscriptions during tough times, risking declines in recurring revenue and margin stability.
  
• Rising operating expenses, including wage inflation, utility costs, and equipment maintenance, have already contributed to higher SG&A and club operations costs, which could compress margins as these secular cost pressures persist industry-wide.
  
• Accelerating trends toward at-home fitness solutions, digital platforms, and a broader consumer focus on holistic wellness over traditional gym experiences could gradually erode the relevance and appeal of Planet Fitness' brick-and-mortar offering, negatively impacting long-term membership growth and recurring revenue potential.

Valuation

• The assumed bullish price target for Planet Fitness is $154.91, which represents two standard deviations above the consensus price target of $122.81. This valuation is based on what can be assumed as the expectations of Planet Fitness's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $175.0, and the most bearish reporting a price target of just $105.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $1.7 billion, earnings will come to $329.8 million, and it would be trading on a PE ratio of 50.1x, assuming you use a discount rate of 9.2%.
  
• Given the current share price of $105.38, the bullish analyst price target of $154.91 is 32.0% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.