On Wednesday, Goldman Sachs updated its outlook on Bright Horizons (NYSE:BFAM) Family Solutions Inc. (NYSE:BFAM), a provider of child care and early education services, by raising its price target from $108 to $123 while maintaining a Buy rating on the stock. The revision reflects an anticipation of growing demand for child care services, as suggested by various alternative data sources.
Analyst commentary highlighted that an analysis of Google (NASDAQ:GOOGL) search trends and Kastle Systems card swipes indicated a rising trend in child care center occupancy rates for Bright Horizons. Google searches for nearby child care services have consistently exceeded pre-pandemic averages this year, with a 4.1% positive variance on a seasonally adjusted basis. This uptick in search activity points to an increasing interest and demand for child care options.
In addition, data from Kastle Systems, which tracks office building access card swipes in major metropolitan areas, shows a gradual return to office work. The latest figures reveal that card swipe volumes have reached 51% of pre-COVID levels as of the last week in March, marking a steady increase from an average of 50% in the first quarter of 2024 and 48% throughout 2023. The implication is a corresponding rise in the need for onsite child care services as more parents return to the workplace.
Based on these trends, Goldman Sachs expects occupancy rates at Bright Horizons centers to climb from the 58-60% range observed in 2023 to between 60-65% in 2024. The firm also projects that these rates could approach or exceed the pre-pandemic levels of over 70% by 2025.
The analyst at Goldman Sachs reaffirmed the Buy rating for Bright Horizons, expressing confidence in the company's growth trajectory over the next 12 months, as reflected in the increased price target. The firm's analysis suggests that Bright Horizons is well-positioned to capitalize on the recovering demand for child care services as societal trends continue to evolve post-pandemic.
InvestingPro Insights
As Goldman Sachs forecasts a positive outlook for Bright Horizons Family Solutions Inc. (NYSE:BFAM), recent data from InvestingPro echoes some of this sentiment. The company's market capitalization stands at $6.52 billion, reflecting its significant presence in the child care and early education sector. Notably, Bright Horizons has experienced a robust revenue growth of 19.69% over the last twelve months as of Q4 2023, which aligns with the increasing demand for child care services that Goldman Sachs anticipates.
InvestingPro Tips highlight that analysts expect net income growth this year for Bright Horizons, adding another layer of optimism to the company's financial prospects. Additionally, the stock has demonstrated a strong return over the last three months, with a 17.65% price total return, indicating investor confidence in the company's performance.
It's worth noting, however, that Bright Horizons is trading at a high earnings multiple with a P/E ratio of 87.95, suggesting that the stock may be priced optimistically in terms of its earnings potential. For investors looking to delve deeper into Bright Horizons' valuation and performance metrics, there are additional InvestingPro Tips available, which can be accessed with a special offer. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and gain insight into 11 more InvestingPro Tips that could help inform investment decisions.
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