What happened
Shares of Bowlero (BOWL -3.25%) were moving higher today on a bullish analyst note from Stifel, which added the stock to its "Select List," and gave it a price target of $25, representing more than a double from its closing price on Friday.
As of 12:26 p.m. ET, the stock was up 9.3%.
Image source: Getty Images.
So what
Stifel analyst Steven Wieczynski made the move after meeting with Vice Chairman and President Brett Parker and gaining an "even higher conviction" in the stock. Wiecyznski also called Bowlero "massively undervalued" and said its recently announced acquisition of the Lucky Strike bowling chain gives it "tremendous upside."
Bowlero has been growing through a roll-up strategy and announced the Lucky Strike deal after completing another acquisition in recent weeks. Its takeover of Lucky Strike came on on May 31 and gives it 14 new locations across nine states. Bowlero paid $90 million to acquire Lucky Strike.
On May 23, the company also acquired Paradise Lanes Entertainment Center in Tacoma, Washington, giving it its fourth location in the state.
The company is coming off a strong fiscal third-quarter earnings report as same-store revenue rose 17% in the period, and overall revenue was up 22% to $316 million, which topped estimates. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) was up 18% to $128 million, but adjusted earnings per share was down from $0.27 to $0.26, matching estimates. Nonetheless, the stock fell on the news.
Now what
As a bowling entertainment company, Bowlero is unique on the stock market, and such businesses can be trendy and unpredictable at times, especially as there's so much competition in entertainment. However, consumers have shown a desire to spend on entertainment-related services like travel and restaurants coming out of the pandemic, and bowling and related entertainment like arcades and billiards likely fit in the same category.
Still, Bowlero has a lot of growth potential in an industry that has historically been fragmented. If it can continue its acquisition strategy and improve profitability, the stock should be a winner.
