On Wednesday, Oppenheimer has increased the price target for Bowlero Corp. (NYSE: BOWL) to $18 from the previous $16, while maintaining an Outperform rating on the stock. The adjustment follows a period of stabilization and improvement in same-store sales (SSS) trends for the company.
According to the firm, the bowling center operator has managed to mitigate risks and align investor expectations with its current growth trajectory. Bowlero is no longer perceived as a high-growth entity with over 20% in same-store sales comps. Rather, it is now recognized as achieving low single-digit to mid-single-digit percentage organic growth, through a combination of pricing and volume increases in a mature industry. This growth is further supported by strategic mergers and acquisitions, as well as the development of new locations, which are expected to propel total revenue growth into the low double-digit percentages.
The firm notes that Bowlero is trading at multiples of 11 times and 10.1 times its projected CY24E/CY25E EBITDA, which is in line with the average multiples of its peers, calculated at around 11.3 times and 10.3 times, respectively. The revised price target of $18 is based on a multiple of 12 times the company's expected CY25E EBITDA.
Bowlero's new valuation reflects a positive outlook for the company's continued growth and financial performance, as it adapts to market conditions and investor sentiment within the leisure and entertainment sector. The price target increase signifies confidence in Bowlero's strategy and its potential to generate sustainable revenue growth moving forward.
InvestingPro Insights
As Bowlero Corp. (NYSE: BOWL) garners a favorable outlook from analysts, key metrics from InvestingPro paint a detailed financial picture of the company. With a market capitalization of $2.11 billion, Bowlero demonstrates a substantial presence in the leisure and entertainment sector. The company's price-to-earnings (P/E) ratio stands at 54.02, which could indicate a high earnings expectation relative to current profits. However, when adjusted for the last twelve months as of Q2 2024, the P/E ratio appears more favorable at 33.62, suggesting a better alignment with near-term earnings growth.
InvestingPro Tips highlight that Bowlero operates with a significant debt burden, which is an important consideration for investors assessing the company's financial health. On a brighter note, management's aggressive share buyback strategy could be a signal of confidence in the company's value. Additionally, Bowlero's stock has shown resilience with a strong return over the last three months, boasting a 29.08% increase. This performance aligns with Oppenheimer's positive revision of Bowlero's price target and may reflect investor optimism.
For those seeking a deeper dive into Bowlero's financials and future prospects, InvestingPro offers a suite of additional tips. Currently, there are 6 more InvestingPro Tips available that can provide investors with a comprehensive understanding of Bowlero's market position and potential. To access these insights and enhance your investment strategy, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at https://www.investing.com/pro/BOWL.
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