Stifel expects fitness chain's stock to rise 30%. How will a diet pill help them?

The hype around GLP-1-class weight loss drugs is opening up new growth opportunities for fitness club chain Planet Fitness, investment bank Stifel predicts. "We believe GLP-1 users could significantly increase fitness club subscriptions in the coming years," analyst Chris O'Call wrote in a note to clients quoted by CNBC. He reiterated a buy recommendation on Planet Fitness shares and a $130 target, up 31% from the Jan. 15 close.

According to the analyst, a recent study supported by the chain's franchisees found that about 50% of new users of weight-loss drugs would consider going to the gym. This could mean that as the popularity of new-generation drugs grows, so will the number of fitness club customers, Stifel writes.

"Planet Fitness' image as an open and accessible network, as well as its dominant media presence, allows the company to claim at least a proportional share in the growing audience of GLP-1 users interested in working out," said O'Call.

In addition, he expects the recent emergence of the tablet form of GLP-1 to make treatment cheaper and more accessible and further accelerate the distribution of these drugs. "We would not be surprised to see consumption volumes double again next year, strengthening the tailwind for the industry," the analyst added.

Planet Fitness shares are down 9% over the past 12 months. At the same time, Wall Street is looking at the company's securities positively: according to LSEG, 16 out of 18 analysts recommend these securities to buy. The consensus price target is $131.6, which suggests a potential upside of nearly 33%.

A weight-loss pill from Danish pharma giant Novo Nordisk entered the US market on January 5, and preliminary data show strong demand, CNBC reports . According to Evercore ISI analyst Umer Raffat, in the first week of sales, the new tablet form of the best-selling drug Wegovy accounted for about 1.3% of all prescriptions for it, the channel reports . Raffat noted that this result indicates high market interest not only in Novo Nordisk's product, but also in a similar drug from rival Eli Lilly, which is due to hit the market in April.

Moreover, unlike the pill Novo, the reception of which is accompanied by restrictions - the patient for half an hour can not eat and drink, the oral drug Lilly is a small molecule and does not require such, and therefore its distribution may be even wider, notes CNBC.

Leerink Partners cites the following data: in the first week after the launch of Wegovy, about 3,100 prescriptions were written for the pill. Eli Lilly's popular obesity injection Zepbound generated about 1,300 prescriptions in the first week after commercial launch and about 8,000 in the second week.

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