On Friday, BofA Securities adjusted its outlook on Life Time Group Holdings Inc (NYSE:LTH), a prominent fitness and lifestyle company, by increasing its price target to $30.00 from the previous $29.00. The firm continues to endorse a Buy rating for the stock.
The upgrade comes amid Life Time's successful expansion in the pickleball sector, which is currently the fastest-growing sport in the United States. According to BofA Securities, the number of pickleball players surged by 53% in 2023, reaching 13.6 million. The sport's growing popularity is also reflected in a 30% increase in related Google (NASDAQ:GOOGL) searches compared to the previous year.
Life Time has capitalized on this trend by expanding its pickleball offerings. Since the first quarter of 2023, the company has increased its number of pickleball courts by 43% and sessions by 71%. Currently, Life Time provides pickleball facilities at 131 of its clubs, which accounts for 75% of its total locations.
The demand for Life Time's memberships is also on the rise, with approximately 26% of its clubs operating on a waitlist due to membership demand outpacing club capacity. This scenario presents the company with an opportunity to further raise membership prices, which could potentially reduce member turnover.
BofA Securities justifies the raised price objective by citing Life Time's strategic initiatives, which appear to be driving increased membership demand. The new price target is based on an enterprise value (EV) of 11-12 times the adjusted EBITDA of $705 million that the firm projects for the calendar year 2025.
In other recent news, Life Time Group Holdings, Inc. reported robust growth in the second quarter of 2024, with total revenue increasing by 19% to reach $668 million and active memberships growing by 5%. The company's net income for the quarter was reported at $53 million.
Following these strong results, Life Time raised its full-year revenue guidance to between $2.56 billion and $2.59 billion, and adjusted EBITDA guidance for the year is now set in the range of $642 million to $652 million.
In other developments, Life Time announced its plan to launch a public offering of 12 million shares of common stock. The offering includes 6 million shares from the company and an equal number from certain existing stockholders, with underwriters having a 30-day option to buy up to 1.8 million more shares. The company aims to use the net proceeds for general corporate purposes, potentially including debt repayment.
Lead active book-running managers for the offering are Morgan Stanley (NYSE:MS) and BofA Securities, with Deutsche Bank (ETR:DBKGn) Securities and Wells Fargo (NYSE:WFC) Securities also managing the book actively. Evercore ISI and Guggenheim Securities are participating as book-running managers.
InvestingPro Insights
Life Time Group Holdings Inc (NYSE:LTH) has shown a strong return over the last three months, with a 35.84% increase in its stock price, reflecting investor confidence in the company's growth trajectory. Analysts are optimistic about Life Time's financial performance, predicting profitability for the year, which aligns with the company's expansion in the burgeoning pickleball sector and increased membership demand. This optimism is further supported by the fact that four analysts have revised their earnings upwards for the upcoming period.
From a financial standpoint, Life Time's market capitalization stands at $4.9 billion, and it trades at a high earnings multiple with a P/E ratio of 44.83. The company's revenue has grown by 17.97% over the last twelve months as of Q2 2024, showcasing its ability to increase earnings. However, it's worth noting that Life Time operates with a significant debt burden, and its short-term obligations exceed its liquid assets, which could present financial challenges.
For investors looking for a more in-depth analysis, there are additional InvestingPro Tips available on the company's profile, which can provide further insights into Life Time's financial health and market performance. In fact, there are 11 more InvestingPro Tips that can be explored for a comprehensive understanding of the company's investment potential.
These insights and metrics are crucial for investors considering Life Time Group Holdings Inc as part of their portfolio, especially in light of BofA Securities' recent price target adjustment and the company's strategic initiatives in the growing pickleball market.
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