We recently compiled a list of the 7 Best Fitness and Gym Stocks to Buy. In this article, we are going to take a look at where Nike, Inc. (NYSE:NKE) stands against the other fitness and gym stocks.
The Fitness Industry: An Analysis
The global wellness market has reached a staggering $1.8 trillion, according to McKinsey. The industry has reached $480 billion in the US alone. 82% percent of US consumers consider wellness a top priority, while those in the UK and China report 73% and 87% respectively.
According to Scott Max, gym memberships are almost half of the fitness industry. Of these, 45% of members are millennials, while 35% are Gen Z. Despite these numbers, today’s fitness industry caters more to the needs of Gen Z. Brands are competing to capture their preferences and behavior. According to NielsenIQ (NIQ) and World Data Lab (WDL), Gen Z’s global fitness spending is projected to reach $12 trillion by 2030.
Under such impressions, Gen Z is called the “Generation Active”. According to Les Mills, 36% of Gen Z are active, while 30% are using fitness facilities. 82% of these are members of gyms or studios, with 72% taking a hybrid approach, training both in and out of the gym.
COVID-19 resulted in the significant closure of gyms and fitness studios, but people are now interested again after the pandemic. Fitness marketplaces like Mindbody ClassPass are now thriving by connecting consumers with studios, gyms, and other wellness providers. It’s a subscription-based platform that allows users to access a variety of fitness experiences with a single membership.
The fitness industry is also seeing new IPOs. According to Reuters, the CEO, Fritz Lanman announced that Mindbody ClassPass is aiming to go public in the next 12-18 months, with Goldman Sachs as its lead banker. The money from the IPO will be used for share buybacks, and buying other businesses. ClassPass, which was acquired by MindBody in 2021, is 65% bigger than pre-Covid, according to Lanman. The overall company, MindBody ClassPass, is projected to achieve a 20% growth in revenue for 2024 (~$500 million).
Good physical strength is associated with mental well-being. Brands can benefit from this focus on physical and mental health and utilize platforms like TikTok to connect with them and offer engaging content. This is especially important for Gen Z, as they spend more hours on their phones as compared to other generations, allowing opportunities for personalized training, and flexible hybrid workout options.
According to Exercise, fitness apps are expected to grow by 21% in the next 5 years. Growing trends of fitness influencers have also positively impacted consumers’ wellness and health intentions. Fitness posts have one of the highest engagement rates on Instagram (~3%).
Gen Z or not, hyper-personalization trends are reshaping how consumers engage with health and wellness. With advancements in technology, individuals seek tailored workouts for their bodies. This shift through apps, wearables, and customized workout plans creates both opportunities and challenges for fitness brands.
Bryan O’Rourke, President of the Fitness Industry Technology Council, said that delivering a customized engagement experience is crucial for retaining members, particularly among Gen Z. Health club members are willing to pay more for a high-value, personalized experience, further driving the growth of boutique studios and small-group training.
According to a McKinsey survey of 5,000+ consumers, AI is a major driver of personalized products and services, where people are using biometrics and gen AI to create customized wellness plans and recommendations. Companies that can offer affordability and clear insights for such services are positioned for success.
The future of wellness is built on science, personalization, and a deep understanding of consumer needs. With the prevalence of weight-loss-assisting drugs, like Ozempic, fitness markets were expected to crash. However, Life Time Chairman and CEO Bahram Akradi says such drugs are only making it easier for people to kickstart their fitness journeys. According to Les Mills, 50% of Gen Z want to exercise regularly but struggle to get started. The availability of Ozempic could drive this generation to surpass millennial gym memberships.
Consumers worldwide are now turning away from unhealthy lifestyles. Investing in fitness stocks offers a compelling opportunity for those looking to capitalize on the growing trend of personalized health solutions. With this context, let’s look at the 7 best fitness and gym stocks to buy now.
Our Methodology
To compile our list, we sifted through ETFs and online rankings to compile a list of 12 fitness stocks. We then selected the 7 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A team of trainers and athletes displaying a wide range of athletic and casual footwear.
Nike, Inc. (NYSE:NKE)
Number of Hedge Fund Holders: 66
Nike, Inc. (NYSE:NKE) is the world’s largest supplier of athleticwear and is well-recognized for sports equipment. The company operates over 1000 retail stores worldwide.
The company generated $12.61 billion in revenue in FQ4 2024, lower than analyst expectations, down 2% year-over-year. For the full-year fiscal 2024, revenue grew around 1% on a currency-neutral basis and earnings per share grew 15%. The company regained the number one position in Korea in women’s lifestyle footwear and made improvements in the Japanese market.
Sales are expected to drop 10% in the next quarter. The company’s CFO, Matt Friend, said that this will be likely due to problems with the company’s e-store, holdback from wholesalers because of the lack of new designs, and lower sales in China because of increased competition and changed consumer preferences.
Nike, Inc. (NYSE:NKE) changed its distribution strategy to make double profits through B2C sales, especially through e-stores, by only keeping retail partnerships with 40 select brands. However this strategy did not work, so it partnered again with some retailers it initially cut out. It also laid off 2% of its corporate workforce in February, equating to 1600 jobs.
The company is expected to improve with the help of its “multi-year innovation program” which will include new products with digital capabilities and technology, and increased speed for concepts to reach the consumer. It’s also planning to invest around $1 billion in consumer-facing activities in 2025.
There is also a focus on new lifestyle products, an example of which is last quarter’s introduction of Dynamic Air, a cushioning technology. At the same time, Nike, Inc. (NYSE:NKE) is reducing the production of some popular products to focus on newer designs, which will temporarily slow down overall growth, but be recovered through new products.
Even with the challenges Nike, Inc. (NYSE:NKE) faces in China or a shortage of new designs, it’s still one of the most premium brands in athletic wear. The company is a reliable and profitable grower, and therefore one of the best fitness and gym stocks to buy now.
ClearBridge Large Cap Growth Strategy stated the following regarding NIKE, Inc. (NYSE:NKE) in its Q2 2024 investor letter:
“Other moves during the quarter included sales of United Parcel Service (UPS) and NIKE, Inc. (NYSE:NKE). Nike has become overly reliant on key platforms, like Jordan, for revenue growth while innovation in areas like running has lagged. Nike could face continued revenue and profit pressure as it invests to re-invigorate innovation and re-position the business back toward wholesale outlets. As such, we are seeking out better ways to participate in the global consumer recovery in companies where earnings estimates have already reset.”
Overall NKE ranks 1st on our list of the best fitness and gym stocks to buy. While we acknowledge the potential of NKE as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NKE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.