DISCLAIMER: pt 1 is still playing out. High THEORETICAL VALUE is how I like to think of my near worthless calls that I’m of course still holding.
Let me back up, so I’ve been bullish on PLNT since mid January and honestly the whole thing started because I’m an avid gym goer. I travel a lot for work, so I have a couple franchise memberships and I just started noticing the Planet Fitness locations I’d pop into were absolutely packed in a way that didn’t used to be the case. As a data scientist, I did my research, the GLP-1 wave is basically sending people to the gym in a way that hasn’t happened before. All these people lost weight but they aren’t shredded, they’ve got no muscle, just loose skin and flab, and Planet Fitness is the least intimidating place on earth to go fix that. On top of that I’m noticing a lot more high schoolers in there, it’s becoming a social spot for that age group, which tells me they’re pulling in a new demographic on top of everything else. The target audience for this brand is everyone and the upside on that is on the same scale.
The business model is also really clean when you look at it. The equipment is a big upfront capital cost and then after that it’s pretty much a cash machine, low overhead, recurring memberships, biggest player in the space by a mile. The earnings numbers were actually really good too, people just fixated on some clunky language from the execs and sold off. I guarantee it doesn’t last. I’m pretty convinced this is the floor.
STRATEGY TAKEN:
I had multiple calls on PLNT going into earnings expiring 2 months from now. To offset this “on paper” loss, I sold a cash secured put, which means I get paid a premium to agree to buy the shares at a price well below where it’s trading if it drops that far (classic buffet style defensive maneuver, I know). If I end up with the shares I sell a covered call on them and collect even more premium while I wait for them to climb.
It goes up, my calls win. It stays flat, I keep the premium and repeat. It drops, I get shares at a price I’m already happy with. Only way I really lose is a total collapse and at that point I’m just a long term holder on a stock I believe in, which I’m fine with. plus this is completely unlikely since institutions hold 95% of the shares and have been accumulating more all quarter after the last drop. They aren’t going to sell at a loss, they are going to be the ones driving the price back UP as they buy more at a cheaper rate. They are betting retail investors all sell out, they know we aren’t patient. Once they think the floor is reached it’s going to start climbing.
People ask about real strategies on here constantly and it always turns into candle charts and indicator debates. Hopefully this is useful to someone, happy to answer questions.
-written by a guy with a planet fitness membership and a STRONG will to succeed gambling with my wife’s money
Posted by data-with-dada