Fitness stocks could have a good recovery as the world starts to open up.
Americans put on weight during the pandemic. According to one well-regarded study, 40% of people in the U.S. admitted to gaining weight as the economy was locked down due to the Covid-19 outbreak, and 71% of people who put on weight said they gained more than five pounds.
The bottom line is that we need to get back in shape. With the economy reopened and gyms and fitness centers back in business, it is time for people to get back on the treadmill or elliptical machine and shed the Covid-19 weight.
A lot of uncertainty surrounds gyms currently as other surveys have found that a majority of Americans do not plan to renew their membership post-pandemic. This is prompting many gyms to offer discounts and other incentives to lure customers back.
Many gyms are adding new equipment and replacing older items in an effort to improve their appeal, which is positive for some fitness companies that supply them. Here are three fitness stocks to buy as gyms start to bulk-up heading into the fall.
Fitness Stocks to Buy: Nautilus (NLS)
Let’s kick things off with Nautilus, the worldwide leader in fitness equipment manufacturing. The treadmills, exercise bikes and weight machines made by Nautilus can be found in gyms across the U.S. and around the world.
Nautilus owns many popular and well-known fitness equipment brands, including Bowflex, Schwinn and Octane Fitness. If any of the fitness stocks are going to benefit from gyms reopening and bulking up on equipment, it is Nautilus.
Yet NLS stock has had a difficult time lately, having fallen 21% over the past month and 44% in the past six months.
At just above $10 per share as of this writing, NLS stock looks undervalued and mighty cheap. The median price target on the shares is currently $18.50, suggesting a significant potential gain over the next 12 months.
The reason the company’s stock is depressed is the weaker-than-expected forward guidance management provided during their last earnings release. While Nautilus reported record results for its fiscal first quarter, the company’s leadership team said they expect flat revenue growth in the current quarter.
Despite the disappointing guidance, there was plenty to like about Nautilus’ earnings. The company reported that its revenue grew 62% year-over-year to a quarterly record of $185 million.
Additionally, Nautilus said it added 40,000 net new customers through its website and ecommerce platform, bringing the total number of new customers over the past 15 months to 380,000.
Here’s hoping that sales get a further boost in the final months of the year as winter arrives and people move into gyms to exercise rather than running and biking outdoors.
Dick’s Sporting Goods (DKS)
Dick’s Sporting Goods does not just sell swim goggles and football cleats. The largest sporting goods retailer in the U.S. with more than 850 outlets sells a full line of exercise and gym equipment, including treadmills, exercise bikes, free weights and rowing machines.
The company should reap rewards as fitness centers begin adding and replacing equipment as clients return in droves this fall and winter. Dick’s also offers an equipment rental service that may appeal to some gyms that would rather rent than own the equipment in their facilities.
The company has been performing so well this year that it recently announced that it plans to reward shareholders with a one-time special dividend payment of $5.50 per share.
DKS stock has been on a monster rally over the past few weeks after its latest earnings results were made public. Over the last month, Dick’s stock has risen more than 30% to a little more than $140. Year-to-date the stock is up 150%.
The retailer’s financials have been getting better and better as the economy reopens and both amateur and professional sports return. The retailer reported that its second-quarter net sales jumped 20.7% year-over-year to $3.27 billion, fueled by a nearly 20% surge in same-store sales.
Wall Street estimates had been looking for revenue of $2.84 billion and same-store sales growth of 5%. Hopefully, Dick’s stock hasn’t peaked and the company can maintain its torrid pace of growth.
Fitness Stocks to Buy: Lululemon Athletica (LULU)
Athletes don’t just need exercise equipment. They also need clothes to wear while working out. Lululemon is the hot play when it comes to exercise clothing and yoga pants.
LULU stock has risen more than 30% in the past six months to $386 per share. The comfortable workout clothes were popular as people worked from home and continue to be popular as people return to gyms and fitness centers.
The company will be looking to sustain momentum when it reports its latest financial figures on Sept. 8.
In this year’s first quarter, Lululemon’s revenue rose an impressive 88% year-over-year to $1.2 billion, driven by a rebound in traffic at its stores throughout Canada and the U.S.
At the same time, the company’s e-commerce revenue grew an equally impressive 55% from a year earlier, even as in-person shopping at its stores resumed.
While Lululemon has grappled with supply constraints at ports and reduced air freight capacity this year, those issues have proved to be minor and have not held LULU stock back.
Disclosure: On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.
