BofA Backs Life Time’s Pickleball Surge: On Friday, BofA Securities raised its price target for Life Time Group Holdings Inc (NYSE: LTH) from $29 to $30, while maintaining a Buy rating for the stock. This adjustment reflects the company’s strong performance, particularly in the fast-growing pickleball market, which has become a key driver for Life Time’s business.
Pickleball, now the fastest-growing sport in the U.S., saw a 53% rise in participants in 2023, reaching 13.6 million players. Google searches related to the sport also jumped by 30%, showing its increasing popularity. Life Time has capitalized on this boom, expanding its pickleball facilities significantly.
Pickleball Expansion Driving Growth
Since the first quarter of 2023, Life Time has ramped up its pickleball offerings, increasing the number of courts by 43% and sessions by 71%. The company now offers pickleball at 131 of its clubs, representing 75% of its total locations. This growth aligns with soaring demand for memberships, with 26% of Life Time clubs now on waitlists due to high demand outpacing capacity.
The increased demand positions Life Time to raise membership prices, potentially reducing member turnover and enhancing overall profitability. This, coupled with strategic growth initiatives, led BofA to raise its price target.
Financial Performance and Future Outlook
Life Time’s financials also support its positive outlook. The company reported a 19% growth in total revenue for the second quarter of 2024, reaching $668 million, alongside a 5% rise in active memberships. Net income for the quarter stood at $53 million, prompting Life Time to raise its full-year revenue guidance to $2.56 billion-$2.59 billion and its adjusted EBITDA to $642 million-$652 million.
In a related development, Life Time announced a public offering of 12 million shares of common stock, with underwriters having an option to purchase an additional 1.8 million shares. The proceeds are intended for general corporate purposes, possibly including debt repayment.
Investment Insights and Risks
Despite strong growth, Life Time faces challenges. Its stock price has surged by 35.84% over the past three months, driven by its pickleball expansion and membership growth. Analysts remain optimistic, with several upward revisions in earnings projections. However, the company operates with significant debt, which could pose risks if short-term obligations outweigh available liquid assets.
Life Time’s market capitalization sits at $4.9 billion, and it trades at a high P/E ratio of 44.83. Investors should remain cautious of its debt burden while considering its strong potential for continued growth, particularly as the pickleball market expands.
News in Brief: BofA Backs Life Time’s Pickleball Surge
BofA Securities raised Life Time Group Holdings’ (NYSE: LTH) price target to $30, citing its success in the booming pickleball market. Life Time expanded its pickleball facilities by 43% in 2023, helping drive a 19% revenue growth to $668 million in Q2 2024.
Membership demand has surged, with 26% of clubs now on waitlists. The company increased its full-year revenue guidance to $2.56 billion-$2.59 billion. While Life Time faces challenges with its significant debt load, analysts remain optimistic due to its strategic growth initiatives and the rising popularity of pickleball across its locations.
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