Investing.com – In a Wednesday note to clients, Morgan Stanley analysts discussed the potential impacts on recreational 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 entertainment sector. While some companies may see minimal disruption, others are more vulnerable due to the concentration of their locations in the state.
The potential impacts on recreational stocks from Hurricane Milton Sun, a Category 5 storm approaching Florida, vary across different companies. Some, like Planet Fitness (NYSE:), have higher exposure, while others may experience minimal disruption because there are 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 heavy focus on corporate-owned stores in Florida.
“PLNT’s store base is particularly concentrated in the South, more specifically in Florida (about 25% of the company’s units),” the analysts said in the note.
Their analysis estimates that about 125 of Florida’s 166 PLNT sites will be affected, based on a 150-mile radius of the hurricane’s projected path. However, the memo emphasizes that “anticipated affected stores will likely need to be closed for at least one month to have a measurable impact on PLNT’s financials.”
The company operates primarily under a franchise model, which helps insulate it from transient events such as hurricanes, and the storm occurs during a low season for membership additions, limiting immediate financial risk.
Meanwhile, gym operator Life Time Group Holdings Inc (NYSE:) appears less vulnerable, with just five locations in Florida, representing less than 3% of its total store base.
“LTH has only five locations in Florida (less than 3% of total locations), with only one location in Tampa (in the direct path of the hurricane).”
Other locations are in Southeast Florida, which is expected to see limited impact. The Tampa club is closed until further notice, but other locations are currently open and are not expected to close.
Finally, 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 those locations — Tampa, Orlando, Fort Myers, Lake Mary and St. Petersburg — are in the hurricane’s projected path and are currently closed.
However, Morgan Stanley analysts note that “the impact is likely to be limited in the absence of significant damage,” and the company does not anticipate long closures unless significant structural damage occurs.