F45 Training Holdings came to Robinhood IPO Access on Wednesday, July 7. You can find it under the ticker "FXLV".

These Robinhood IPO stocks so far have been top-tier - Figs Inc. (NYSE: FIGS) and Clear Secure Inc. (NYSE: YOU) gained up to 90% and 46% respectively after their IPOs.

But F45 stock seems like a different story after pricing at $16.

Sure, the company is backed by actor Mark Wahlberg. It's seen monstrous growth over the last few years, now with over 2,000 franchises.

Now that it's getting publicity through the Robinhood IPO Access portal, you can expect retail investors to come banging at the door for some F45 stock.

Here's what you should know about this stock - and the reason you're better off avoiding it for now.

What Is F45 Training Holdings?

F45 Training Holdings was founded in Australia in 2013 and is now based in Austin, Texas. It has over 1,500 studios and a total of 2,800 franchises in 63 countries since its founding.

The company combines the franchising of a Planet Fitness Inc. (NYSE: PLNT) and the camaraderie of a CrossFit gym into one, offering an intense, modernized workout regimen for serious gym-goers.

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It offers custom training programs and tools to help customers thrive in their fitness goals. These include circuit training, high-intensity interval training (HIIT), and more. Altogether, it offers over 36 different workout experiences and continues to develop more.

Technology plays a major role in how these programs are carried out. Every studio features video workout demonstrations and custom music playlists.

The company operates on a monthly membership model, starting at $20 per month.

As one of the fastest-growing gyms worldwide, it has 650 studios in the United States and 550 in Australia. But that does not necessarily mean you should buy F45 stock...

F45 Training Holdings IPO Details

The company expected F45 stock to price between $15 and $17 ahead of the IPO date. Now, it's priced smack in the middle of that range - 20.3 million shares at $16 per share to raise more than $324 million.

That money will not go to the company as revenue but rather to the selling stockholder. That's a first mark against this stock for potential shareholders to consider.

F45 will be valued at about $1.4 billion.

It was set to merge with a blank check company, Crescent Acquisition, back in 2020. That deal was canceled after several F45 studios closed due to COVID-19. That's yet another negative.

It's only fair to note that 86% of the studios were able to reopen following March 2020, according to the S-1. The company implemented proper COVID-19 guidelines to get there.

Today's F45 IPO timing also shows it wants to be considered among the "reopening stocks" making headlines today.

However, let's not assume fitness will come back as strong as travel or hospitality just yet...

If F45 Training Holdings Profitable?

Opening over 2,000 franchises in less than 10 years is a big deal. F45 has accelerated its growth dramatically over the last decade, pushing for its goal of 23,000 studios worldwide.

The company admits in its IPO filing that COVID-19 slowed that growth.

We mentioned how F45 gyms closed in the early-COVID months of April and March. The company saw a revenue drop of 11% in 2020 as a result.

The company was not profitable to begin with. But its net loss increased to $25 million from $12 million the year prior. The loss margin for 2021 so far, reported in the S-1 filing, is even steeper at $36 million.

F45 claims to have taken all the necessary steps to keep its studios sanitary, opening the majority of its studios since.

Unfortunately, COVID-19 is not the only thing holing this company back.

You can say that this company is still young and growing fast, so volatile revenue can be expected. But you would at least hope to see revenue increasing over time with the increase in studios around the world.

This is just not the case. Revenue fell from $92 million in 2019 to $18 million in 2021.

Even with Mark Wahlberg's endorsement and a "reopening" boom, it can be hard to compete as a gym stock. Here's why...

Should You Buy F45 Stock?

The bottom line is that the price of $16 is expensive for this company.

The fitness industry carries a unique range of preferences.

Some enjoy yoga or pilates exclusively. Others shoot hoops. Others still swear by "Rusty Henry's Barbell" operating inside an abandoned factory for 20 years and counting.

The point is, if you want to stay alive in the fitness industry, you have to do everything perfect to hit your target audience.

F45 might do that, but it's hard to justify such a niche fitness package for the long term. Gyms come and go. Workouts go in and out of style.

And this is an unprofitable gym with decelerating revenue.

At the given range, F45 stock has a price-to-sales ratio around 18. Compare that to Planet Fitness at 12.6 and Peloton Interactive Inc. (NASDAQ: PTON) at 7.

Planet Fitness is profitable, by the way - and it doesn't have to invest in much fancy tech to keep its people around.

Yes, F45 could be thinking in the right direction, scaling and offering hi-tech, 45-minute workouts with remote potential. But this is a super competitive area with a growing home technology sector featuring Peloton and Mirror.

Ultimately, the IPO price, shrinking revenue, and growing loss margin should be enough for investors to sit this one out.

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