We recently published a list of The 7 best fitness and gym stocks to buy. In this article, we take a look at how Adidas AG – ADR (OTCMKTS:ADDYY) 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 well-dressed woman tries on a pair of shoes in a monobrand franchise store.
Adidas AG – ADR (OTCMKTS:ADDYJ)
Number of hedge fund holders: N/A
Adidas AG – ADR (OTCMKTS:ADDYY) is a German sportswear and footwear manufacturer. It is the largest sportswear manufacturer in Europe and the second largest in the world. In 2023, the main sales (55%) came from footwear, 38% from sportswear and other apparel, and 7% from accessories.
In October 2022, when the company owned $1.3 billion worth of Yeezy sneakers, Adidas AG – ADR (OTCMKTS:ADDYY) was forced to end its partnership with Kanye West due to his circulating anti-Semitic and other offensive comments.
These problems led to an unprofitable 2023 with a net loss of $82.8 million. This was the first time in the last 5 years and resulted in a loss per share of $0.46. CEO Bjørn Gulden nevertheless considered the company’s earnings in 2023 to be good under the circumstances.
Footwear sales increased 8% in the fourth quarter of 2023, while apparel sales fell 13%. Therefore, marketing investments were increased by 9% in the first quarter of 2024 to build “brand excitement.” This was a big step in increasing brand popularity and thus consumer demand.
The company benefited from a rising trend for flat suede “Terrace” sneakers – such as the Samba and Gazelle – and increased production of these shoes to help the company deliver strong sales in the second quarter of 2024.
In the second quarter of 2024, Adidas AG – ADR (OTCMKTS:ADDYY) generated revenues of $6.35 billion, beating analysts’ expectations by $308.33 million, representing year-over-year growth of 8%. Despite the net loss, the company proposed an unchanged dividend of $0.76 per share, the same as in 2023.
In the second quarter, sales increased 9% year over year, leading to a new, higher operating profit forecast of $1.1 billion. Despite the loss of that footwear line, Yeezy sales contributed about $163.9 million to revenue.
Global sales are expected to grow by a mid to high single digit percentage compared to a mid single digit percentage. The company claims that it will soon regain its old market share from its competitors.
Total ADDYY 7th place on our list of the best fitness and gym stocks to buy. While we recognize ADDYY’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 ADDYY 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.
