It May Be Worth Swapping Peloton For Planet Fitness In 2021
By Todd Gordon
December 16, 2020
Two exercise stocks are on the run this quarter.
Peloton, up nearly 29% since Oct. 1, has soared as some states reimposed Covid-19 restrictions amid rising case counts. Planet Fitness, up over 19% in the same time frame, has climbed on reopening hopes as the Covid vaccine rollout begins.
With New Year’s resolutions right around the corner and the timing of the reopening still up in the air, it’s worth taking a closer look at the fitness trade to see what might work in 2021, two traders say.
Mark Tepper, president and CEO of Strategic Wealth Partners, said it may soon be time to flip the script.
“As I look forward to 2021, I would begin to look to rotate out of Peloton into Planet Fitness,” he told CNBC’s “Trading Nation” on Tuesday.
“I’m not doing it today, not at this price,” he added. “I get really interested in Planet Fitness in the low 60s.”
Planet Fitness shares closed down almost 4% at $73.15 on Tuesday. And though the $60s may seem far off, a second wave of lockdowns would likely force a decline to those levels, Tepper said.
“It was between 50 and 65 all summer long while gyms were open,” he said.
“I’ve always loved this company, I just haven’t been able to get in at the right price,” he said. “First things first, it is a unit growth story. So, they have the opportunity to further penetrate their market by continuing to open new locations. Second thing is their subscription model is absolutely genius. At $10 a month, it’s actually more painful to cancel your membership than it is to just keep paying them.”
Tepper, who owns a Peloton exercise cycle, joked that he “would consider paying $10 a month at this point for the opportunity to get out of my house.”
“So, I’m not pulling the trigger on this trade yet, … but I am watching it,” he said.
On a technical basis, Peloton still appears to have room to run, TradingAnalysis.com founder Todd Gordon said in the same “Trading Nation” interview.
“It’s trading 300 times next year’s earnings, but they are spending a lot right now to grow,, so I’m not overly concerned about that,” Gordon said, adding that he was “impressed” with how the company is handling newfound competition from Apple.
Better yet, on the chart, “we actually don’t see resistance until about $200,” another 56% above where Peloton closed on Tuesday, Gordon said. The stock ended trading up almost 5% at $127.78 a share.
“I’m long from 35, which has been a really nice entry,” Gordon said. “Any hesitation into those February 3rd earnings and I will look to protect because we will cover those holiday orders.”
Gordon was also impressed by Peloton’s staying power versus other exercise fads.
“Peloton was the first that capitalized on sort of this social networking, digital environment, where a lot of other exercise and these kind of experience companies have failed. You look at Lululemon’s acquisition of Mirror and I don’t see it gaining much momentum,” he said. “I think the popularity of cycling is increasing. … I think a lot of people are sort of getting away from impact exercise.”
And at about $2,000 to $3,000 per exercise cycle, “it’s kind of hard to get away” from Peloton once a purchase has been made, Gordon said.
“I’m going to stick with it for now, but I hear Tepper’s cautiousness going forward,” he said.
Disclosure: Gordon and Tepper both own shares of Peloton.
Todd Gordon
Founder and Lead Analyst of Trading Analysis
Todd has been trading as a career for the last 20+ years. His goal is to not only provide insightful analysis, but to teach people how to think and grow as professional traders. Todd is a practitioner of Elliott Wave Theory and he uses it to gain an edge in the highly competitive trading arena. In addition to trading professionally, Todd has worked as an analyst and researcher at two different hedge funds. Click Here To Learn More about Todd Gordon