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Planet Fitness’ Stock Crashes Following CEO's Departure

Shares of Planet Fitness (NYSE:PLNT) plummeted 16% on Friday, as they hit a new 52-week low of $49.31. Year to date, the stock is now down around 36%. This decline came in the wake of the company's announcement that its Chief Executive, Chris Rondeau, is stepping down from his position.

Rondeau has been with Planet Fitness since 2013 and will stay on the board. Craig Benson, another member of the board, will take on the CEO responsibilities in the interim. There was no reason given for Rondeau’s departure and that company said it was not due to any “unexpected financial events.”

Planet Fitness, with its presence spanning the U.S., Canada, Mexico, and Australia, operates both directly and as a franchiser of fitness centers. As of August, the company had approximately 2,500 locations.

The company recently reported its Q2 earnings where revenue of $286.5 million rose by 28% year over year. And profits nearly doubled to $41.1 million. Currently, the stock trades at a forward price-to-earnings multiple of 25 – higher than the S&P 500 average of 20.

A change in leadership can spook investors but it doesn’t mean the business is necessarily in trouble. The danger is in reading too much into this news. Planet Fitness’ fundamentals remain strong as this is a top brand in the industry that is still growing and posting strong profits, and that’s what investors should focus on.

I would, however, hold off on buying the stock just yet as given the bearishness surrounding it and its high valuation, it could sink lower in the weeks ahead.