On Tuesday, Deutsche Bank has increased the price target for Life Time Group Holdings Inc (NYSE:LTH) to $25 from the previous $24, while retaining a Buy rating for the company's shares. The firm is optimistic about the company's growth trajectory, which is expected to be driven by a combination of factors.
According to the investment bank, Life Time Group's growth strategy is built on three main pillars: growth in same-store sales, an increase in the number of units, and a shift to positive net cash flow following significant growth-related capital expenditures. This shift is anticipated to lead to a reduction in the company's debt levels over time.
The bank highlighted that Life Time Group's ability to increase monthly dues is a significant element of its business model. However, there is also potential in enhancing the profitability of supplementary services, such as food and beverage, spa, and additional offerings like ARORA, DPT, and Stretch. These aspects are seen as potentially undervalued components of the company's medium-term growth plan.
The analyst from Deutsche Bank stated, "We continue to like the path forward for LTH, which in our view consists of three key prongs: same-store top line growth, unit expansion, and inflection to positive net cash flow after growth cap-ex (with subsequent de-leveraging of the balance sheet)."
Furthermore, the analyst expressed confidence in the company's pricing strategy and its impact on revenue. "We believe there is still a high flowthrough pricing (i.e., monthly dues increase) component to the LTH story," the analyst added, indicating that the company's financial performance is bolstered by its pricing power.
The investment firm also pointed to Life Time Group's ancillary services as an area with room for improved efficiency and profitability. The focus on these services is considered a less recognized but important aspect of Life Time Group's growth strategy, which could contribute to the company's performance in the coming terms.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.