Investing.com — In a Wednesday note to clients, Morgan Stanley analysts discussed the potential impacts on leisure stocks from Hurricane Milton Sun, a Category 5 storm approaching Florida.
According to the Wall Street firm, the impact is expected to be mixed across different companies in the leisure sector. While some companies may see minimal disruptions, others are more exposed due to the concentration of their locations in the state.
The potential impacts on leisure stocks from Hurricane Milton Sun, a Category 5 storm approaching Florida, are varied across different companies. Some, like Planet Fitness (NYSE:), have higher exposure, while others may experience minimal disruptions due to fewer locations in the storm’s path.
Specifically, fitness center operator Planet Fitness is the most exposed of the companies covered by Morgan Stanley, with a significant concentration of corporate-owned stores in Florida.
“PLNT’s corporate store base is particularly concentrated in the south, and more specifically the state of Florida (~25% of corporate units),” analysts said in the note.
Their analysis estimates that around 125 of PLNT’s 166 locations in Florida will be impacted, based on a 150-mile radius from the hurricane’s expected path. However, the note emphasizes that “the expected affected stores would likely need to be closed for at least one month to have a quantifiable impact on PLNT’s financials.”
The company operates primarily under a franchise model, which helps insulate it from transitory events like hurricanes, and the storm is hitting during a low season for membership additions, further limiting the immediate financial risk.
Meanwhile, the athletic country clubs operator Life Time Group Holdings Inc (NYSE:) appears less exposed, with only five locations in Florida, representing less than 3% of its total store base.
“LTH only has five locations in Florida (<3% of total locations), with just one of them being in Tampa (in the direct path of the hurricane).”
The other locations are in southeastern Florida, which is expected to see limited impact. The Tampa club has closed until further notice, but the other locations are currently open and not expected to shut down.
Lastly, Topgolf, part of Topgolf Callaway Brands (NYSE:), faces moderate exposure.
The company has nine locations in Florida, about 10% of its total base. Five of these locations—Tampa, Orlando, Fort Myers, Lake Mary, and St. Petersburg—are in the hurricane’s projected path and are currently closed.
Still, Morgan Stanley analysts state that “impact is likely limited absent severe damage,” and the company does not expect prolonged closures unless major structural damage occurs.
