It’s that time of year, when overindulging in everything from turkey to cake to beer becomes commonplace.
And along with the traditional holiday caloric intake increases — and the size of people’s waistlines — comes the inevitable New Year’s resolutions. Many people will vow solemnly to get out and get fit after months of overindulging.
That could mean good things for fitness-related companies and their publicly traded stocks. While more than two-thirds of Americans are obese or overweight, according to the World Health Organization, more people are exercising. According to a Gallup poll, 55 percent of Americans say they exercised 30 minutes at least three days a week in June, more than in any month since Gallup and Healthways began tracking the data in January 2008.
That may translate into good news for investors looking at fitness stocks. “The category is very healthy — no pun intended,” says Camilo Lyon, a managing director at Canaccord Genuity in New York.
From fitness trackers to running shoes to workout clothes, here are a few companies investors may want to keep an eye on.
Garmin Ltd. (ticker: GRMN). Garmin may not have been the first company to come to mind for investors seeking a company that’s been delivering in the past few months. Earnings recently missed analyst estimates on a non-GAAP basis and the stock on Oct. 15 fell to a 52-week low.
Analysts, however, are high on GRMN stock, thanks to improvements in the company’s product offerings and a generally good outlook for the niche wearable-fitness tracker market it fills.
Jonathan Ho, a Chicago-based analyst for William Blair & Co., says he sees several positives for the company, including a soon-to-be-released watch that has a built-in heart-rate monitor — a feature for which consumers have been clamoring for some time — and a strong dividend yield approaching 6 percent.
“We like the company’s opportunity to grow in fitness and positioning in niche areas,” Ho says. Garmin has a “high cash balance they can use for M&A or share buybacks [and] the company is moving past headwinds from currency in the fourth quarter.”
Ho predicts that fitness bands and watches will be popular this season. As more people are focusing on getting in shape, that can only help companies that produce fitness products.
But take note: Garmin fills a very niche market. Wearable watches that track distance, speed, heart rate and a bevy of other fitness metrics are generally purchased by only hardcore runners, cyclists, triathletes and other endurance sport enthusiasts. That could limit the company’s upside potential.
Fitbit (FIT). One of the newcomers that has investors talking, and looking at their wrists, is Fitbit. The product is more for the average Joe who wants to track the number of steps they’ve taken in a day and perhaps monitor their heart rate (but aren’t obsessed with it).
Analysts are also high on FIT stock, giving it a consensus “strong buy” rating. Acquity Group, an e-commerce and digital marketing company, says only 7 percent of U.S. consumers currently own a wearable fitness device, but that will increase to 28 percent by next year.
Shares have surged 38 percent since the company’s IPO in June and analysts are thinking it could go higher, given its products are innovative, yet very mainstream. The company will offer improved and innovative products as time goes on, which will give it a leg up in the wearable fitness product category, says Mark Sue, an analyst at RBC Capital Markets. Fitbit also has inked deals with several large companies to provide employees’ fitness data.
“We expect new products with better screens [and] more accurate trackers to give way to glucose/blood pressure/energy exertion reading over time,” he says. “On the corporate health and wellness side, recent deals to supply Target (TGT) and Barclays (BCS) may show a multiplier effect.”
More than a fifth of the company’s sales come from outside the U.S., and expansion offshore could be a boon for FIT stock, Sue says. Recent announcements show a “commanding share” in European markets, another area of potential growth. “We like the market-share position, profitability and growing ecosystem that are driving profits and cash flow while at the same time allowing for investments in scale.”
The company’s products also allow users to share fitness data on social media, and in today’s plugged-in world, that’s no small thing. Half the fun of exercising is letting everybody know you went for a run.
Nike (NKE). Having a Garmin or Fitbit is fun, but the fitness-minded will actually need to exercise if they hope to lose the unwanted pounds they gain during the holidays. While you can run without shoes (and some people do), those who enjoy wearing footwear may look to industry stalwart Nike for their running needs.
Lyon says he likes Nike because of its role as a sector leader. The company’s also taking strides to stay ahead of the competition in terms of what he calls fitness fashion — form along with function.
“Particularly on the basketball side, there’s more” of a fashion aspect, Lyon says. “Nike is capitalizing on the footwear side, and has done a much-improved job on the women’s side.”
The company in September reported earnings at $1.34 a share on $8.41 billion in revenue, beating projections as reported by Reuters of $1.19 per share on $8.22 in revenue. NKE stock was upgraded in early October to a “buy” at DA Davidson, which put a $140 price target on the stock, saying it had an enviable brand position.
Under Armour (UA). While Lyon says he’s “not dim on the outlook” for Nike, he’s even more favorable on Under Armour.
Certainly, the company’s popularity has grown in the past decade, thanks to creative marketing aimed at a younger crowd, but it goes far beyond advertisements.
As with Fitbit and Garmin, Under Armour is capitalizing on the social aspects of fitness. The company in the past 12 months acquired companies that develop fitness apps, including myfitnesspal.com and mapmyfitness.com, bringing with them 150 million users who upload information about their exercise and diets.
“That’s powerful information to have,” Lyon says. “There’s an app called UA Record that is ultimately going to be a centralized home for those apps. Over the next year or two, they’re going to integrate all of the apps they have into one harmonious app. While it does take a little time, to have 150 million users — and continuing to sign them up at such a quick pace — that’s pretty amazing considering the other companies that boast those kinds of numbers, like Facebook (FB), Google (GOOG, GOOGL) and Twitter (TWTR).”
The company could conceivably increase its customer base by tracking the data input into the apps it purchased, or one it develops in the future, and speak directly to customers based on the amount of training they do or their fitness goals.
“Think about the power involved with UA knowing that you’re training for a triathlon, and getting a message from them saying, `Congratulations on your training, we see you’re running X miles a month, and, oh, by the way, it looks like your running shoes may be wearing thin so press this button and we’ll send you out a new pair,'” Lyon says. “That’s powerful. Layer that on to the social community aspect and you have a very captive audience.”
More from U.S. News
9 Money Faux Pas to Avoid at Holiday Gatherings
8 Smart Ways to Invest in Metal Stocks
13 Stocks to Buy to Bet on China
Keep Holiday Inches Away With These 4 Fitness Stocks originally appeared on usnews.com
