We recently published a list of 10 Best Fitness and Gym Stocks to Buy Now. In this article, we are going to look at where Peloton Interactive, Inc. (NASDAQ:PTON) stands against other fitness and gym stocks to buy now.
Overview of the Fitness and Global Wellness Industries
The fitness and wellness industries are projected to be major global players in the coming decades with the world shifting to healthy modes of living. Estimates by McKinsey show that the global wellness market has reached around $1.8 trillion, and has touched $480 billion in the US alone. Around 82% of US consumers rank wellness as their top priority. Similar sentiments can be seen resonating across the globe, as around 73% and 87% of the consumers in the UK and China report the same, respectively.
According to the Health and Fitness Club Global Market Report 2024 released by the Business Research Company, the health and fitness club market has also grown exponentially in recent years. It is estimated to continue on this growth trajectory, going from $92.90 billion in 2023 to $101.46 billion in 2024. Much of this growth can be attributed to an increasing number of apartment complexes offering fitness and gym perks, rapid urbanization, the rising popularity of group fitness classes, government programs promoting fitness and health, and the corporatization of jobs.
Social media influencers also have a major role in this significant mind shift, with many users getting inspired to undertake fitness endeavors and gym memberships to attain the signature “fit body” image. In addition, growth in fitness franchises, personalized training programs, and training plans are also boosting a shift towards fitness and preventive healthcare.
The health and fitness club market size is anticipated to continue growing in the coming decade. The report estimates it to rise at a CAGR of 9.3%, reaching around $144.82 billion in 2028. Some of the significant trends in this forecast include using artificial intelligence for personalized workout recommendations, adopting smart gym equipment, and using AI-powered fitness and health apps.
Gen Z and Millennials in the Fitness Industry
The population aged 20-64 is the largest consumer niche in the industry that has grown exponentially in the past five years. According to Scott Max, gym memberships make up almost 50% of the fitness industry, and around 45% of these members are millennials. Gen Z makes up approximately 35% of this industry. Despite millennials taking the lead in numbers, gym and fitness brands are competing to capture the preferences of Gen Z.
They are altering their business strategies, focusing on contract-free and low-price memberships. According to NielsenIQ (NIQ) and World Data Lab (WDL), the global fitness spending by Gen Z is estimated to reach $12 trillion by 2030. Similarly, estimates by Les Mills show that around 36% of Gen Z is active, while 30% use fitness facilities. Around 82% of these facilities include gyms or studios. However, a significant number also take a hybrid approach, training both in and out of the gym.
The Global Online/Virtual Fitness Market
Owing to these trends, the global online/virtual fitness market is also growing. According to the Global Online/Virtual Fitness Market Report 2023, the industry grew at a CAGR of 39.4%, going from $15.65 billion in 2022 to $21.82 billion in 2023. It is anticipated to continue on this growth trajectory, growing at a CAGR of 36.9% to reach $76.57 billion by 2027.
The primary driver of this growth is the increasing use of mobile phones and smart devices in the fitness industry. With users increasingly relying on their mobile phones and AI-enabled fitness apps to dictate their fitness and gym journeys, this growth trend is expected to persist.
Our Methodology
To compile our list, we sifted through ETFs and online rankings to compile a list of 15 fitness and gym stocks. We then selected the top 10 stocks most popular among elite hedge funds. We sourced the hedge fund data from Insider Monkey’s database. The stocks are arranged in ascending order of the number of hedge funds that have stakes in them as of Q3 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).
Peloton Interactive, Inc. (NASDAQ:PTON)
Number of Hedge Fund Holders: 35
Peloton Interactive, Inc. (NASDAQ:PTON) is a global fitness company that operates an interactive fitness platform. Its operations are divided into the Subscription and Connected Fitness Products segments. The company boasts a community of more than six million members, and offers tech-enabled, connected fitness and instructor-led classes to its members anywhere, anytime.
The company is aligning its cost structure to its current business size by delivering more than $200 million of run-rate cost savings from its cost restructuring plan by the end of the fiscal year 2025. It is also improving its unit economics across all its sales channels and products to generate profitable growth and meaningful free cash flow. Peloton Interactive, Inc. (NASDAQ:PTON) is also making strategic investments in innovations to boost its long-term growth. These investments include refining its market strategies, undertaking product development in both hardware and software features, and evolving its content for more engaging and diversified fitness experiences.
Peloton Interactive Inc. (NASDAQ:PTON) is also undergoing strength in its category-leading connected fitness subscription business. It has over 6 million loyal members, 586,000 app subscribers, 2.9 million connected fitness subscribers, and over $1.7 billion in annualized subscription revenue.
Overall, PTON ranks 6th on our list of one of the best fitness and gym stocks to buy now. While we acknowledge the potential of PTON to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than PTON 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.
