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Pro Analysis

Buy Planet Fitness on rapid expansion: JPMorgan

Planet Fitness
Bernard Weil | Toronto Star | Getty Images

Investors should buy Planet Fitness as the gym chain undergoes a rapid expansion plan that will double the number of locations, according to JPMorgan.

"We see above average long-term franchise driven unit growth of 10-15 percent plus and a strong history of positive SSS (same store sales) growth expected to drive 10-15 percent adjusted EBITDA growth," JPMorgan's John Ivankoe wrote in a note to clients Monday.

He added, "Unit development is the primary driver of value, as this influences franchise fees, placement revenues, equipment sales and royalty growth. "

The analyst resumed coverage of Planet Fitness with an overweight rating and a $22 price target, representing 24 percent upside from Friday's close. The gym chain had its IPO last August.