Exercise was a profitable pandemic bet, but those gains are shrinking

The Beachbody Company CEO Carl Daikeler on his online training company, masks in gyms and current fitness trends.

Americans have been fighting the bulge for years, nearly three-quarters are now overweight or obese, and the pandemic has caused some serious setbacks.

That at least offered savvy investors the opportunity to grease their wallets. After the shares of exercise bike and treadmill maker Peloton Interactive lost nearly half of their value in just five weeks when fears about Covid 19 erupted in February 2020, shares rebounded more than 800% over the next 10 months. Even better were the stocks of Nautilus Inc., which sells a wider range of exercise bikes, from bicycles to weights to ellipticals, under brands like Bowflex and Schwinn. Investors quick enough to pounce on the stock’s two-thirds sell-off last March could have made up to 25 times their money.


ticker safety Last Change Change%
NLS NAUTILUS INC. 11.77 +0.16 +1.38%
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PTON PELOTON INTERACTIVE, INC. 108.07 +0.27 + 0.25%

Now that the world has opened up, despite the alarming spread of the Delta variant, it seems that the gym chain Planet Fitness could be a better weight loss game. Its stocks rose 16% on the day last November when Pfizer and BioNTech announced their Covid-19 vaccine was more than 90% effective, while Peloton’s fell more than 20%. It was hit hard at the beginning of the pandemic with all of its U.S. gyms closed, but the company recently announced that it had passed the 15 million membership mark near its previous high. And the stocks that hit a new record earlier this year are now slightly below their 2020 starting level.

ticker safety Last Change Change%
PLNT PLANET FITNESS INC 70.13 +1.14 +1.65%
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PFE PFIZER INC. 48.72 -0.08 -0.16%
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BNTX BIONTECH SE 348.68 +16.87 + 5.08%


Becky Friese Rodskog rides her Peloton exercise bike at home in San Anselmo, Calif. On April 6, 2020 (Photo by Ezra Shaw / Getty Images)

Could all three be attractive at these prices? Taking some numbers of the companies at face value, this is one possible conclusion. For example, Jim Barr, chief executive of Nautilus, says his company’s studies suggest that between 12% and 30% of commercial gym goers never return and choose to stay fit at home. And while this seems like bad news for Planet Fitness, the company reports that its competitors fared far worse than they did during the pandemic, as more than a fifth of U.S. gyms and fitness boutiques closed.

Do some assessment exercise, however, and suddenly none of the fitness-related stocks look very muscular, whether or not Covid-19 persists. Peloton’s revenue, for example, is expected to grow 32% this fiscal year and slow down thereafter, according to analysts surveyed by FactSet, but earnings estimates for fiscal years 2022 and 2023 have declined sharply. It’s now trading at an astronomical 182 times expected profits as delivery delays weigh out and other companies undercut them with cheaper connected equipment.

One of them is Nautilus, which also has a far more humble rating. His prestigious Bowflex C6 bike is like a peloton for poor people at just under half the price. The company is targeting a sustainable operating margin of 15% by 2026, compared to the 15-year average of less than 3%. But those margins are now reversed as the company struggles with higher costs and most of its inventory is stuck in transit. Earnings estimates up to the end of fiscal year 2023 have fallen by more than half in just a few months.

Even at Planet Fitness, which is clearly on the upswing, there is less than meets the eye. Before the pandemic, the company generated more than a third of its sales from the sale of franchisee equipment, which it made big margins on. This includes the opening of new gyms and mandatory replacement every five to eight years. It had to take a break last year, postpone renewals, and device sales for the first half of that year were less than 30% of what it was in the first half of 2019. Rising membership royalties hide this, but the parent company’s increased revenue could hurt future growth if franchisees reluctance. The store openings have slowed down dramatically. With a forward profit of 56x compared to a pre-2020 average of 32, the stock has rarely been this expensive.


Just as diet offers more for the money than exercise to those on a weight loss journey, investors should look to WW International, formerly known as Weight Watchers, instead. The stock cracked earlier this month when the company reported that subscriber numbers had unexpectedly stalled. CEO Mindy Grossman attributed the lack of interest in diets to people who wanted to treat themselves to something good during their first normal summer in two years. The company, known to be associated with major shareholder Oprah Winfrey, is launching a new marketing campaign in September and has seen impressive growth in digital subscribers. Stocks look leaner, realizing only 11.4 times future earnings, compared to an average of 17.5 times in the five years leading up to the pandemic.

They say you can never be too thin or too rich. While the first is a bit over the top, the second isn’t. The way there could be faster with diet than with exercise at the moment.

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