On Friday, Evercore ISI initiated coverage on Life Time Group Holdings Inc (NYSE: NYSE:LTH) stock, assigning the fitness company an Outperform rating and establishing a price target of $29.00. The firm's analysis suggests a significant opportunity for Life Time Group to increase its market share in a sector marked by high fragmentation.
The coverage initiation is based on the potential for Life Time Group to capture a larger slice of the market. Evercore ISI's market size analysis estimates that there are approximately 29 million people who both regularly exercise and have a high disposable income, which is considered the total addressable market (TAM) for Life Time Group. Currently, with a membership count of 827,000, Life Time Group only taps into roughly 2.9% of this TAM.
In comparison to the low-end gym industry, which has a TAM of about 91 million people, the leading gym operator in this segment, Planet Fitness (NYSE:PLNT), holds a double-digit market share. Evercore ISI points out that the high-end market, where Life Time Group operates, presents higher barriers to entry, yet Life Time Group has a significantly lower market share, underscoring the potential for growth.
The firm believes that the opportunities for Life Time Group to attract new members are considerable. This potential for acquiring new members is seen as a driving force that could sustain long-term growth for the company. Evercore ISI's stance on Life Time Group reflects a positive outlook on the company's ability to expand its presence in the high-end fitness market.
In other recent news, Life Time Group Holdings, Inc. showcased robust financial growth in its third-quarter 2024 earnings. The company reported a significant 18.5% year-over-year increase in total revenue to $693.2 million and adjusted EBITDA of $180.3 million, surpassing projections from Goldman Sachs (NYSE:GS) and consensus. In light of these strong results, Life Time Group revised its full-year 2024 guidance for adjusted EBITDA to between $658 million and $662 million, and raised its revenue forecast to a range of $2.595 billion to $2.605 billion.
Furthermore, the company recently secured a private offering of $500 million in Senior Secured Notes due 2031, issued by its indirect subsidiary, Life Time, Inc., and guaranteed by LTF Intermediate Holdings, Inc. and certain domestic restricted subsidiaries. Simultaneously, Life Time Group Holdings amended its existing credit agreement, introducing a New Term Loan Facility amounting to $1 billion, maturing in 2031.
Despite the company's strong performance, Goldman Sachs maintained a Neutral rating on Life Time Group Holdings with a price target of $22.00. The company also announced plans for strategic expansion, intending to open 10 to 12 new locations in 2025, despite some inconsistencies in performance across clubs and delays in projected openings. These recent developments reflect Life Time Group's ongoing efforts to optimize its financial position and secure long-term financing.
InvestingPro Insights
Recent data from InvestingPro adds depth to Evercore ISI's bullish outlook on Life Time Group Holdings Inc (NYSE: LTH). The company's market capitalization stands at $5.05 billion, reflecting its significant presence in the high-end fitness market. Life Time's revenue growth of 18.12% over the last twelve months as of Q3 2023 aligns with Evercore's view on the company's growth potential. This robust revenue growth is complemented by a healthy gross profit margin of 46.88%, indicating strong pricing power in its premium segment.
InvestingPro Tips highlight that Life Time is trading at a low P/E ratio relative to its near-term earnings growth, with a PEG ratio of 0.33. This suggests that the stock may be undervalued considering its growth prospects, supporting Evercore's Outperform rating. Additionally, the company has seen a large price uptick over the last six months, with a 47.76% total return, reflecting growing investor confidence.
It's worth noting that InvestingPro offers 11 additional tips for Life Time Group Holdings, providing investors with a more comprehensive analysis of the company's financial health and market position. These insights can be particularly valuable given the growth opportunities highlighted in Evercore's coverage initiation.
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