We recently published a list of The 7 best fitness and gym stocks to buy. In this article, we take a look at how Nike, Inc. (NYSE:NKE) compares to other fitness and gym stocks.
The fitness industry: An analysis
The global wellness market has reached a staggering $1.8 trillion, according to McKinsey. In the US alone, the industry has reached a value of $480 billion. 82% of US consumers consider wellness a top priority, while in the UK and China, the figures are 73% and 87% respectively.
According to Scott Max, gym memberships account for nearly half of the fitness industry. Of these, 45% of members are millennials, while 35% are Gen Z. Despite these numbers, today’s fitness industry is more responsive to the needs of Gen Z. Brands are competing to capture their preferences and behavior. According to NielsenIQ (NIQ) and World Data Lab (WDL), global fitness spending by Gen Z is expected to reach $12 trillion by 2030.
With such impressions, Generation Z is referred to as “Generation Active.” According to Les Mills, 36% of Generation Z are active, while 30% use fitness facilities. 82% of these are members of gyms or studios, with 72% taking a hybrid approach, exercising both in and outside the gym.
COVID-19 caused many gyms to close, but post-pandemic, people are interested again. Fitness marketplaces like Mindbody ClassPass are currently thriving by connecting consumers with studios, gyms, and other wellness providers. It is 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, CEO Fritz Lanman announced that Mindbody ClassPass plans to go public in the next 12 to 18 months, with Goldman Sachs as its lead banker. The money from the IPO will be used for share buybacks and buying other companies. ClassPass, which was acquired by MindBody in 2021, is 65% larger than it was pre-Covid, according to Lanman. The overall MindBody ClassPass company is expected to achieve 20% revenue growth (about $500 million) by 2024.
Good physical strength is linked to mental wellbeing. Brands can capitalize on this focus on physical and mental health and use platforms like TikTok to connect with them and offer engaging content. This is especially important for Gen Z as they spend more time on their phones compared to other generations, creating opportunities for personalized training and flexible hybrid training options.
According to Exercise, fitness apps are expected to grow 21% over the next 5 years. The growing trend of fitness influencers has also had a positive impact on consumers’ wellness and health intentions. Fitness posts have one of the highest engagement rates on Instagram (~3%).
Whether you’re Gen Z or not, hyper-personalization trends are changing the way consumers approach health and wellness. As technology advances, people are looking for customized workouts for their bodies. This shift through apps, wearables, and personalized workout plans creates both opportunities and challenges for fitness brands.
Bryan O’Rourke, president of the Fitness Industry Technology Council, said providing a tailored engagement experience is critical to retaining members, especially among Generation Z. Gym members are willing to pay more for a high-quality, personalized experience, which continues to drive the growth of boutique studios and small group training.
According to a McKinsey survey of more than 5,000 consumers, AI is a key driver of personalized products and services, where people use biometrics and AI to create customized health plans and recommendations. Companies that can offer such services affordably and with clear insights are poised for success.
The future of wellness is based on science, personalization and a deep understanding of consumer needs. With the proliferation of weight loss drugs like Ozempic, a collapse in fitness markets was expected. However, Bahram Akradi, Chairman and CEO of Life Time, says such drugs only make it easier for people to start exercising. According to Les Mills, 50% of Gen Z want to exercise regularly but struggle to start. The availability of Ozempic could see this generation surpass Millennials in gym memberships.
Consumers worldwide are currently turning away from unhealthy lifestyles. Investing in fitness stocks presents an attractive opportunity for those looking to capitalize on the growing trend of personalized health solutions. With that in mind, let’s look at the 7 best fitness and gym stocks you can buy now.
Our methodology
To compile our list, we combed through ETFs and online rankings and compiled a list of 12 fitness stocks. We then selected the 7 stocks that were most popular among elite hedge funds and that analysts were bullish on. The stocks are sorted in ascending order by the number of hedge funds that hold shares in them (as of Q2 2024).
At Insider Monkey, we’re obsessed with the stocks hedge funds invest in. The reason is simple: Our research shows we can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (more details can be found here).
A team of trainers and athletes presents a large selection of sports and leisure shoes.
Nike, Inc. (NYSE:NKE)
Number of hedge fund owners: 66
Nike, Inc. (NYSE:NKE) is the world’s largest sports apparel company and is known for its athletic equipment. The company operates over 1,000 retail stores worldwide.
The company generated revenue of $12.61 billion in the fourth quarter of 2024, less than analysts expected and down 2% year over year. For the full fiscal year of 2024, revenue increased about 1% and earnings per share increased 15% on a currency-neutral basis. The company regained the top position in Korea in women’s lifestyle shoes and made progress in the Japanese market.
Sales are expected to decline 10% in the next quarter. The company’s CFO Matt Friend said this was likely due to problems with the company’s e-store, wholesaler reluctance due to a lack of new designs and lower sales in China due to increased competition and changing consumer preferences.
Nike, Inc. (NYSE:NKE) changed its sales strategy to earn double profits from B2C sales, especially through e-stores, by only having retail partnerships with 40 select brands. However, this strategy did not work, so the company re-partnered with some retailers it had initially excluded. The company also laid off 2% of its workforce in February, which is equivalent to 1,600 jobs.
The company is expected to improve through its “multi-year innovation program,” which includes new products with digital capabilities and technologies and faster adoption of concepts to consumers. The company also plans to invest around $1 billion in customer-facing activities in 2025.
There is also a focus on new lifestyle products, such as the introduction of Dynamic Air, a cushioning technology, last quarter. At the same time, Nike, Inc. (NYSE:NKE) is reducing production of some popular products to focus on newer designs, which will temporarily slow overall growth but can be made up for by new products.
Despite the challenges Nike, Inc. (NYSE:NKE) faces in China and the lack of new designs, the company is still one of the highest-quality sportswear brands. The company is growing reliably and profitably, making it one of the best fitness and gym stocks to buy right now.
ClearBridge Large Cap Growth Strategy announced the following about NIKE, Inc. (NYSE:NKE) in its Q2 2024 Investor letter:
“Other activities in 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 may continue to face revenue and profit pressure as the company invests to reignite innovation and refocus the business on wholesale. As such, we are looking for better ways to participate in the global consumer recovery in companies that have already seen their earnings guidance reset.”
NKE total 1st place on our list of the best fitness and gym stocks to buy. While we recognize NKE’s potential as an investment, we believe AI stocks promise higher returns and do so in a shorter time frame. If you’re looking for an AI stock that’s more promising than NKE but trades at less than 5x earnings, read our report on the cheapest AI stock.
READ MORE: Analyst sees a new $25 billion “opportunity” for NVIDIA And Jim Cramer recommends these 10 stocks in June.
Disclosure: None. This article was originally published on Insider Monkey.
