As consumers observe social distancing, they are getting time to rekindle their new year’s resolutions. After the novelty of Netflix (NASDAQ:NFLX) and Disney (NYSE:DIS) movies wears off, consumers are realizing that, sadly, the same can’t be said for the pounds they may be packing on from sedentary habits. And that’s giving fitness stocks a nice jolt.
However when investors think of fitness stocks, they need to take a wider view than looking at only equipment providers. Consumers still want to look and feel their best. Plus, even if they are just lounging around, there’s no reason they shouldn’t it do that in the comfort of “athleisure.”
Here are four fitness stocks that can help investors profit from this season of sheltering:
Unfortunately, the novel coronavirus is expected to peak over the next week to 10 days. It’s a certainty that the economy will remain shuttered through the rest of April. After that, it’s anyone’s guess. Even when it does reopen, a “phased in” approach may leave many consumers at home.
And that means that rather than having a short runway, these fitness stocks may have some room to run.
Among fitness stocks, Peloton is one that many investors love to hate. However, this could be a gigantic opportunity for PTON shareholders. There’s a statistic, treated as fact, that it takes 21 days to form a habit. However, a more scientific study puts that number at closer to 66 days.
In a study published in the European Journal of Social Psychology, Phillippa Lally wanted to use scientific principles to determine how long it actually takes to form a habit. Lally and her team concluded that it could take between two and eight months to form a habit. But they also found that there was no significant connection between missing a day or two and not forming the habit.
One of the obstacles to a company like Peloton is that consumers lose momentum. But this period of quarantine can prove to be a national science experiment for more than flattening the curve of the virus. Perhaps this will be an opportunity for Peloton to build a core of users who decide, after about two months, that perhaps the woman in the Peloton ad was onto something.
Fitbit started to lose its mojo in 2019. The stock had been trading basically sideways for several years, but early in 2019, threat of increasing competition seemed to be wearing on the stock. However, the holidays gave FIT stock a lift and that gain has held.
Normally that wouldn’t be something to celebrate. But when the rest of the market is down by 20% or more, it’s no small accomplishment. But what does the future hold? Well, as more and more fitness enthusiasts are socially distanced from their personal trainers, they are rediscovering their Fitbit.
And it looks like Fitbit may be gaining traction with the all-important millennial generation. Robinhood has FIT as one of its 100 most popular stocks.
To be sure, the company still faces an obstacle in the legal wrangling over its possible acquisition by Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL). The Department of Justice is requesting more information from Google. What this means ultimately is hard to say. Fitbit will receive $250 million from Google if the deal falls through. But it will be a more interesting play for investors if the deal is complete.
Some healthy habits simply require the ability to get up and move. And if that means needing a new pair of kicks, so be it. Don’t get me wrong, this won’t be an easy time for Nike. Many consumers are struggling with obtaining the basic necessities. But that’s not the case for everyone. And investors know it.
For many that are seeing their location, but not income, disrupted by the coronavirus, there has to be something to spend money on. Why not new running shoes or workout gear to go along with your new fitness routine?
And even if that assumption is incorrect, it isn’t like Nike is going away. Nike has a loyal, passionate consumer base who will buy the company’s products. One of the biggest problems for Nike at the moment is the fact that the entire sports world is shut down. There was no bigger source of advertising for Nike than to see its signature swoosh in stadiums and arenas.
At this point, any advertiser has to be careful about how aggressively they pursue sales. But Nike should be just fine, particularly with customers having a reason to seek out its products.
LULU stock has been clobbered by coronavirus uncertainty. Even after a recent rally, the stock is still down over 10% for the year. But that still leaves the stock up nearly 20% over the last 12 months. That shows the strength of the company prior to the coronavirus outbreak.
And if the coronavirus teaches us anything, it’s that it can’t kill the trend toward athleisure. Lululemon has had to close and then reopen stores in China. And now it is going through the same painful process in the United States. But the company looks well positioned to weather the virus financially. Lululemon has $1 billion of cash in the bank and a growing e-commerce presence that will allow the company to weather the immediate impact of the virus.
The company beat on earnings and revenue in its most recent report, but like many companies did not offer forward guidance. That clarity will come soon enough. What is less clear is what will happen to the company’s experience stores. By encouraging customers to enter, shop, eat and maybe take a yoga class, it’s the antithesis of social distancing.
However at this point, the most important thing for retail companies is survival, and Lululemon should do that just fine.
Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019. As of this writing Chris did not hold a position in any of the aforementioned securities.