Fitness continues to be big business in the U.S., which makes investing in fitness stocks an appealing idea.
In 2020, the market size of the gym, health and fitness club industry in America was estimated at more than $32 billion, according to Statista. And that was during a global pandemic, when most gyms and fitness centers were forced to close.
In better years, Americans spent nearly $38 billion staying in shape. With so much money flowing into the exercise industry, it should come as no surprise that some of the best-performing stocks are those of fitness companies.
While the S&P 500 index has returned 18% so far this year, many fitness stocks have posted gains of more than 100%, with further upside in front of them.
Here are the three best fitness stocks for investors to buy for a financially fit fourth quarter.
Fitness Stocks to Buy: Dick’s Sporting Goods (DKS)
You might not think that a stock that has gained 111% year to date has more room to run. But retailer Dick’s Sporting Goods looks to have substantial runway ahead of it.
The 19 professional analysts who are offering 12-month price forecasts on DKS stock have a median target on the shares of $153, which represents a 27% further gain from its current price of about $120. And now is great time to grab shares of Dick’s Sporting Goods after the price has pulled back 18% from the 52-week high of $147.39 it reached in early September.
The Coraopolis, Pennsylvania-based company that has more than 850 retail outlets and 50,000 employees across the U.S. has ridden the economic reopening to profits and shareholder gains all year long. DKS stock jumped 40% higher after the company’s second quarter earnings were released in August. The Q2 results included annual sales growth of 21% and earnings per share of $5.08 compared to $2.80 expected by analysts. Dick’s also raised its forward guidance, saying it now expects full-year earnings to range from $11 to $11.45 per share.
DKS stock could pop again if the company exceeds expectations when it reports third quarter earnings on Nov. 23.
Lululemon Athletica (LULU)
Another fitness stock worth grabbing on the pullback is athletic apparel retailer Lululemon Athletica. Shares of LULU stock have come down 3% over the past month. However, the stock is still up 26% over the past six months and has a median price target on it of $470, which would be an increase of about 18%. The Vancouver, British Columbia-based retailer continues to enjoy strong sales as the trend towards casual and comfy dress at both home and work continues.
Lululemon’s annual sales now totals $5.5 billion, and the company’s operating profit in the second quarter jumped 134% from the same period of 2020. While Lululemon’s yoga pants and women’s wear continues to sell well, it is the company’s men’s wear segment that has been powering its sales and profits higher this year. Revenue generated from the menswear division has grown 31% annually over the past two years and Lululemon Chief Executive Officer Calvin McDonald has said that the company will double its men’s business this year.
With Lululemon morphing into a global business and lifestyle brand, now is a great time to buy the dip in the company’s stock.
Fitness Stocks to Buy: Peloton (PTON)
Is there hope for connected fitness company Peloton? Down 43% on the year, including a 21% drop in the past month, PTON stock is off 50% from its 52-week high of $171.09. Peloton’s fall from grace is due to the exercise from home trend waning as people return to public gyms and private fitness centers, as well as a devastating recall of the company’s treadmills, which were found to injure children, resulting in at least one death.
The decline has been swift for a stock that climbed 403% in 2020 during the Covid-19 pandemic when gyms were closed and people were peddling and jogging at home.
While ugly, the decline in PTON stock poses a buying opportunity for savvy investors. Recall aside, Peloton continues to perform well with subscriptions to its connected fitness classes rising. The New York City-based company reported that its subscription revenue rose 132% year-over-year in its most recent quarter to $281.6 million, and gross profit from subscriptions increased 159% to $178.1 million. Peloton is also expanding beyond its core business of exercise equipment, moving into corporate wellness and hotel and resort management.
Much of the decline in PTON stock this year has been based on a perception that the business is slowing. In reality, analysts have a median price target on Peloton’s shares of $130, which would be a huge gain from current levels.
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.
