Is BellRing Brands, Inc. (BRBR) A Good Fitness and Gym Stock To Buy Now?
We recently compiled a list of the 7 Best Fitness and Gym Stocks to Buy. In this article, we are going to take a look at where BellRing Brands, Inc. (NYSE:BRBR) stands against the other fitness and gym stocks.
The Fitness Industry: An Analysis
The global wellness market has reached a staggering $1.8 trillion, according to McKinsey. The industry has reached $480 billion in the US alone. 82% percent of US consumers consider wellness a top priority, while those in the UK and China report 73% and 87% respectively.
According to Scott Max, gym memberships are almost half of the fitness industry. Of these, 45% of members are millennials, while 35% are Gen Z. Despite these numbers, today’s fitness industry caters more to the needs of Gen Z. Brands are competing to capture their preferences and behavior. According to NielsenIQ (NIQ) and World Data Lab (WDL), Gen Z's global fitness spending is projected to reach $12 trillion by 2030.
Under such impressions, Gen Z is called the “Generation Active”. According to Les Mills, 36% of Gen Z are active, while 30% are using fitness facilities. 82% of these are members of gyms or studios, with 72% taking a hybrid approach, training both in and out of the gym.
COVID-19 resulted in the significant closure of gyms and fitness studios, but people are now interested again after the pandemic. Fitness marketplaces like Mindbody ClassPass are now thriving by connecting consumers with studios, gyms, and other wellness providers. It’s 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, the CEO, Fritz Lanman announced that Mindbody ClassPass is aiming to go public in the next 12-18 months, with Goldman Sachs as its lead banker. The money from the IPO will be used for share buybacks, and buying other businesses. ClassPass, which was acquired by MindBody in 2021, is 65% bigger than pre-Covid, according to Lanman. The overall company, MindBody ClassPass, is projected to achieve a 20% growth in revenue for 2024 (~$500 million).
Good physical strength is associated with mental well-being. Brands can benefit from this focus on physical and mental health and utilize platforms like TikTok to connect with them and offer engaging content. This is especially important for Gen Z, as they spend more hours on their phones as compared to other generations, allowing opportunities for personalized training, and flexible hybrid workout options.
According to Exercise, fitness apps are expected to grow by 21% in the next 5 years. Growing trends of fitness influencers have also positively impacted consumers’ wellness and health intentions. Fitness posts have one of the highest engagement rates on Instagram (~3%).
Gen Z or not, hyper-personalization trends are reshaping how consumers engage with health and wellness. With advancements in technology, individuals seek tailored workouts for their bodies. This shift through apps, wearables, and customized workout plans creates both opportunities and challenges for fitness brands.
Bryan O’Rourke, President of the Fitness Industry Technology Council, said that delivering a customized engagement experience is crucial for retaining members, particularly among Gen Z. Health club members are willing to pay more for a high-value, personalized experience, further driving the growth of boutique studios and small-group training.
According to a McKinsey survey of 5,000+ consumers, AI is a major driver of personalized products and services, where people are using biometrics and gen AI to create customized wellness plans and recommendations. Companies that can offer affordability and clear insights for such services are positioned for success.
The future of wellness is built on science, personalization, and a deep understanding of consumer needs. With the prevalence of weight-loss-assisting drugs, like Ozempic, fitness markets were expected to crash. However, Life Time Chairman and CEO Bahram Akradi says such drugs are only making it easier for people to kickstart their fitness journeys. According to Les Mills, 50% of Gen Z want to exercise regularly but struggle to get started. The availability of Ozempic could drive this generation to surpass millennial gym memberships.
Consumers worldwide are now turning away from unhealthy lifestyles. Investing in fitness stocks offers a compelling opportunity for those looking to capitalize on the growing trend of personalized health solutions. With this context, let's look at the 7 best fitness and gym stocks to buy now.
Our Methodology
To compile our list, we sifted through ETFs and online rankings to compile a list of 12 fitness stocks. We then selected the 7 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A wide shot of an aisle in a food store lined with different nutrition products.
BellRing Brands, Inc. (NYSE:BRBR)
Number of Hedge Fund Holders: 42
BellRing Brands, Inc. (NYSE:BRBR) is a food and nutrition company that promotes healthy eating through flavorful, nutritious, and convenient packaged goods, such as protein shakes, bars, and powders. All these products are available for immediate consumption. Distribution channels include grocery, drugstores, e-commerce, retailers, and some club stores, like Costco.
In FQ3 2024, revenue was $515.4 million, with a 15.59% year-over-year growth, and EPS was $0.54. Both beat expectations. Consumption grew 10% and accelerated to 20% in July.
The Premier Protein brand recorded an overall 19.8% sales growth. The RTD shakes and protein powder have a strong demand. There was a 9.6% and 43.6% dollar consumption increase in Premier Protein RTD shakes and Premier Protein powder products respectively, as compared to 2023.
The brand Dymatize’s international business increased net sales by 18% in FQ3. However, overall net sales fell by 3%. So most of the loss came from US consumption, which represents ~60% of the brand. Now BellRing Brands, Inc. (NYSE:BRBR) is increasing its investment in marketing and promotion at Dymatize within the US.
BellRing Brands, Inc. (NYSE:BRBR) is expanding product lines. On March 4 and June 17, the company debuted Cookie Dough High Protein Shake, and Premier Protein Pancake & Waffle Mixes. In 2023, it launched 3 new products.
The company has been expanding its production capabilities since FQ3 2023, as indicated by the successful launch of a new greenfield co-manufacturing facility – which meant setting up a new manufacturing facility to increase production capacity. This was done to scale up production to meet the growing demand for protein products.
Wasatch Core Growth Fund stated the following regarding BellRing Brands, Inc. (NYSE:BRBR) in its fourth quarter 2023 investor letter:
“BellRing Brands, Inc. (NYSE:BRBR)) was also a significant contributor. BellRing’s offerings include nutritional shakes, powders, bars and other products primarily marketed under the Premier Protein and Dymatize brands. We like the company’s asset-light operating model, which relies on outsourced production. Given the low cost of BellRing’s products and perceived value among a loyal and growing group of health-conscious consumers, we believe the company has a durable, economically resilient business. Moreover, we think the intellectual property associated with BellRing’s shelf-stable, good-tasting products is relatively difficult for competitors to replicate. Amid the fallout from the Covid-19 pandemic, the company’s production capacity had been severely constrained, impacting revenues and earnings. In 2023, BellRing was able to add new outsourced production facilities—and even more will be added in 2024. Finally, the company and the stock benefited from the proliferation of GLP-1 agonists, such as Ozempic, being used for weight loss. Dieters often consume BellRing’s products in an effort to ingest enough nutrients. That said, the GLP-1 trend wasn’t part of our original investment thesis and isn’t why we continue to own the stock.”
Overall BRBR ranks 4th on our list of the best fitness and gym stocks to buy. While we acknowledge the potential of BRBR as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BRBR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.