Exercise Was a Profitable Pandemic Bet. Those Gains Are Shrinking.

Exercise Was a Profitable Pandemic Bet. Those Gains Are Shrinking.

Americans have been fighting the battle of the bulge for years, with close to three-quarters now overweight or obese, and the pandemic dealt many a serious setback.

At least that presented an opportunity for savvy investors to fatten their wallets. After losing nearly half of their value in just five weeks as fears about Covid-19 erupted in February 2020, shares of exercise bike and treadmill maker Peloton Interactive rebounded by more than 800% over the next 10 months. Even better were shares of Nautilus , which sells a broader range of home exercise equipment, from bikes to weights to ellipticals, under brands such as Bowflex and Schwinn. Investors who were quick enough to pounce on the stock’s two-thirds off sale last March could have made as much as 25 times their money.

Now that the world has opened up, the alarming spread of the Delta variant notwithstanding, it would seem that a better play on the weight loss theme might be gym chain Planet Fitness. Its shares surged by 16% on the day last November when Pfizer and BioNTech announced that their Covid-19 vaccine was more than 90% effective while those of Peloton fell more than 20%. It was hit hard early in the pandemic, with all of its U.S. gyms closed, but the company recently announced that it passed the 15 million member mark, close to its previous high. And its shares, which touched a new record earlier this year, are now slightly below where they started 2020.

Could all three be attractive at these prices? Taking some numbers from the companies at face value, that is one possible conclusion. For example, Nautilus Chief Executive Jim Barr says his company’s studies indicate between 12% and 30% of commercial gym goers will never go back, opting to stay fit at home. And while that would seem to be bad news for Planet Fitness, that company reports that its competitors fared far worse than it did during the pandemic, with more than a fifth of U.S. gyms and fitness boutiques closing.

Do an exercise in valuation, though, and suddenly none of the fitness-related stocks look very muscular, whether or not Covid-19 lingers. Peloton’s sales, for example, are expected to grow by 32% this fiscal year, according to analysts polled by FactSet, slowing thereafter, but earnings estimates have been sliding sharply for fiscal 2022 and 2023. It now trades at an astronomical 182 times forward earnings, as shipment delays weigh and other companies undercut it with cheaper connected equipment.

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