(Bloomberg) — Planet Fitness is sinking after the company announced the immediate departure of CEO Chris Rondeau after more than a decade at the helm.
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Shares fell 16% on Friday to close at $50 a share, the lowest level since 2020. The company said Rondeau will remain a board member and will be up for re-election in 2024. Planet Fitness also appointed board member Craig R. Benson. The interim CEO and search for a permanent leader has begun.
The change alerted analysts, prompting one to cut his recommendation on the stock. Wall Street is generally bullish on the company, with more than 80% of those covering Planet Fitness giving it a buy rating and the average target price for the stock rising 50%, according to data compiled by Bloomberg.
Cowen Planet lowered its price target to $55 from $72, downgrading Planet Fitness to a market perform.
“The move adds uncertainty to the franchise’s health, opening outlook and competitive position,” wrote analysts led by Max Raklenko.
Baird analysts, led by Jonathan Komp, lowered their price target on the stock to $65 from $87, but maintained their outperform rating.
“We are surprised by today’s announcement, but we can see why the board will casually transition to a more experienced executive as PLNT addresses its near-term challenges with lower unit economics,” Komp wrote in a note. “We suspect the board has made a difficult turnaround following recent underperformance; the move raises several near-term doubts, though not enough to override PLNT’s attractive valuation in our view.”
Shares of Planet Fitness are down 36% in 2023.
Stifel analysts agree that new leadership could be a growth opportunity for Planet Fitness.
“While the timing of the announcement is surprising, we believe the leadership transition sets the stage for a rapid turnaround, with certain elements of the model – such as raising the price of the Classic membership package – possibly now on the table for consideration,” wrote analysts led by Chris O’Cool.
Read More: Planet Fitness Fails As 2023 Development Plan Rattles Investors
Analysts at DA Davidson, who also maintain a neutral rating on the shares, see the company cutting future targets.
“PLNT said it will reassess its multi-year opening targets, and is believed to lower the targets set at its analyst meeting on November 15, 2022,” analysts led by Linda Bolton Weisser wrote in a note.
Weiser, who has a $66 target, added that the company “has offered several reasons why franchise unit openings have slowed down. Target on shares.
Still, others remain positive on the fitness chain.
William Blair analyst Sharon Zakfia said: “While the leadership transition will not be disruptive, we continue to believe that Planet can deliver healthy EPS growth with its unique value-focused, high-volume model and superior ratings, even in a slow expansion environment.” Note.
–Contributed by Katrina Compoli.
(Updated stock moves near the market. Added previously updated Cowen’s commentary)
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