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Bowlero (BOWL) Gains 14% in the Past 3 Months: What's Next?
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Bowlero Corp. (BOWL - Free Report) , an American bowling center operator, has gained 13.5% in the past three months, notably outperforming the Zacks Leisure and Recreation Services industry, Zacks Consumer Discretionary sector, and the S&P 500 Index. During the same time frame, the industry and the S&P 500 Index gained 4.4% and 8.6%, while the sector’s declined 2%.
Price Performance
Image Source: Zacks Investment Research Bowlero is benefiting from its traffic-driving initiatives, organic and inorganic expansion plans, and the relaunch of its renowned Summer Season Pass in 2024. The company witnessed year-over-year top-line growth in the third quarter of fiscal 2024, portraying the positive impacts of the tailwinds mentioned above.
Driving factors of BOWL
Traffic-Boosting Initiatives: Given the nature of the business, Bowlero needs to be continuously seeking investment opportunities to drive its traffic, given the direct relationship between traffic and sales trends. Although these initiatives come hand-in-hand with additional costs, it is worth undertaking them given the traffic growth and positive same-store comps. Per the company, three core aspects primarily highlight its traffic-driving plans, as of the third quarter of fiscal 2024.
Firstly, the company’s amusement offerings through increased gameplay have aided it in improving guest satisfaction and are likely to continue to drive guest traffic even in the slower months. Secondly, its investment in PBA programming has enabled the company to boost its brand recognition. Per the company, since the beginning of fiscal 2024, about 18.5 million viewers have watched the PBA on Fox, which is 16% higher than the year-ago period. Compared to fiscal 2019, the debut year of PBA airing on Fox Sports, average minutes viewed per viewer have increased 15% so far in fiscal 2024. Lastly, Bowlero’s augmented focus on increasing the sales of food and beverage through new menus and updated pricing rollout bode well.
Summer Season Pass Aiding Growth: The relaunch of the Summer Season Pass in 2024 aided the company’s top line immensely, given the rebranding of Summer Games, improved value proposition, and the pricing model to the consumers. This is one of the main tools that Bowlero devises to drive its foot guest traffic.
On Jun 24, 2024, the company announced that the sales of its Summer Season Pass have exceeded $6 million since the beginning of fiscal 2024. This achievement represents the highest pass sales in the company's history. This remarkable success underscores the increasing appeal of the Summer Season Pass and highlights Bowlero's dedication to providing exceptional value and entertainment to its patrons.
Organic & Inorganic Expansion Plans: One of the company’s growth initiatives includes the strategic deployment of its capital in acquisitions and new builds. During the nine months that ended on Mar 31, 2024, Bowlero completed six acquisitions in which it acquired 20 locations. The company also entered into a strategic transaction with VICI Properties Inc. for the transfer of land and real estate assets of 38 locations for an aggregate value of $432,900. Also, during the same time frame, Bowlero acquired all the assets of Lucky Strike Entertainment, LLC, which includes 14 locations, for a total consideration of $89,936.
For the next nine months, as of May 2024, Bowlero has four new builds coming up, including two openings in Denver this summer, one opening in Beverly Hills in the early fall, and another opening in Orange County, CA, in the late fall. With the increasing investments in expanding its footprint, Bowlero is well-positioned to add value to shareholders, pay down debt, and undertake general corporate purposes.
What May Hinder the Stock's Momentum?
As Bowlero undertakes various strategic investments, organic as well as inorganic, it is bound to come across additional expenses that likely take a toll on its bottom-line performance. During the third quarter of fiscal 2024, the company’s total operating expense increased 11% year over year to $40.8 million, primarily driven by a 10% increase in selling, general and administrative (SG&A) expenses to $39.5 million.
Furthermore, the company is subject to various weather-related challenges, especially when it comes to foot traffic counts. As of Mar 31, 2024, the same-store revenues declined 2.1% year over year. Along with other factors, the downtrend was driven by adverse weather conditions in January that led to a reduction in foot traffic.
Estimate Trend Revision
The Zacks Consensus Estimate of the company's fourth-quarter fiscal 2024 earnings per share (EPS) has trended upward to 1 cent from break-even earnings over the past 30 days. The estimated figure indicates 111.1% growth from the prior year’s reported levels. Over the said time frame, although the consensus estimate for fiscal 2025 EPS has moved south to 32 cents from 33 cents, it indicates a whopping 260.9% year-over-year growth. This bullish trend signifies the optimism of investors and probable consideration in their portfolios.
EPS Trend
Image Source: Zacks Investment Research
Inclusion in Portfolio – Yay or Nay?
Bowlero has significantly outperformed than few of the other industry players, including Manchester United plc (MANU - Free Report) , The Madison Square Garden Company Corp. (MSGS - Free Report) , and Live Nation Entertainment, Inc. (LYV - Free Report) . In the past three months, shares of MANU and MSGS have gained 6.8% and 4.8%, respectively, while shares of LYV have lost 7.3%.
Notably, BOWL’s trailing 12-month ROE is indicative of its growth potential. ROE for the trailing 12 months is 330.5%, much higher than the industry’s 2.7%, reflecting the company’s efficient usage of shareholders’ funds.
On the other hand, the forward 12-month price-to-sales ratio of 1.72X is above the industry average of 1.43X. The overvaluation of the stock in comparison with its peers makes it difficult for investors to consider it under their portfolio.
From the above discussion, this Zacks Rank #3 (Hold) is sending mixed signals to the investors, clouding their judgment on the feasible action to be undertaken regarding it. The company’s business growth initiatives and accretive capital allocation strategies are fostering growth trends, while increased expense structure is marring the bottom line. However, given the estimated trend revision, it can be said that the company is on its way to redeeming its bottom-line growth. Existing shareholders should hold onto their current position with BOWL while the potential new investors can wait for a better entry point. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Bowlero (BOWL) Gains 14% in the Past 3 Months: What's Next?
Bowlero Corp. (BOWL - Free Report) , an American bowling center operator, has gained 13.5% in the past three months, notably outperforming the Zacks Leisure and Recreation Services industry, Zacks Consumer Discretionary sector, and the S&P 500 Index. During the same time frame, the industry and the S&P 500 Index gained 4.4% and 8.6%, while the sector’s declined 2%.
Price Performance
Image Source: Zacks Investment Research
Bowlero is benefiting from its traffic-driving initiatives, organic and inorganic expansion plans, and the relaunch of its renowned Summer Season Pass in 2024. The company witnessed year-over-year top-line growth in the third quarter of fiscal 2024, portraying the positive impacts of the tailwinds mentioned above.
Driving factors of BOWL
Traffic-Boosting Initiatives: Given the nature of the business, Bowlero needs to be continuously seeking investment opportunities to drive its traffic, given the direct relationship between traffic and sales trends. Although these initiatives come hand-in-hand with additional costs, it is worth undertaking them given the traffic growth and positive same-store comps. Per the company, three core aspects primarily highlight its traffic-driving plans, as of the third quarter of fiscal 2024.
Firstly, the company’s amusement offerings through increased gameplay have aided it in improving guest satisfaction and are likely to continue to drive guest traffic even in the slower months. Secondly, its investment in PBA programming has enabled the company to boost its brand recognition. Per the company, since the beginning of fiscal 2024, about 18.5 million viewers have watched the PBA on Fox, which is 16% higher than the year-ago period. Compared to fiscal 2019, the debut year of PBA airing on Fox Sports, average minutes viewed per viewer have increased 15% so far in fiscal 2024. Lastly, Bowlero’s augmented focus on increasing the sales of food and beverage through new menus and updated pricing rollout bode well.
Summer Season Pass Aiding Growth: The relaunch of the Summer Season Pass in 2024 aided the company’s top line immensely, given the rebranding of Summer Games, improved value proposition, and the pricing model to the consumers. This is one of the main tools that Bowlero devises to drive its foot guest traffic.
On Jun 24, 2024, the company announced that the sales of its Summer Season Pass have exceeded $6 million since the beginning of fiscal 2024. This achievement represents the highest pass sales in the company's history. This remarkable success underscores the increasing appeal of the Summer Season Pass and highlights Bowlero's dedication to providing exceptional value and entertainment to its patrons.
Organic & Inorganic Expansion Plans: One of the company’s growth initiatives includes the strategic deployment of its capital in acquisitions and new builds. During the nine months that ended on Mar 31, 2024, Bowlero completed six acquisitions in which it acquired 20 locations. The company also entered into a strategic transaction with VICI Properties Inc. for the transfer of land and real estate assets of 38 locations for an aggregate value of $432,900. Also, during the same time frame, Bowlero acquired all the assets of Lucky Strike Entertainment, LLC, which includes 14 locations, for a total consideration of $89,936.
For the next nine months, as of May 2024, Bowlero has four new builds coming up, including two openings in Denver this summer, one opening in Beverly Hills in the early fall, and another opening in Orange County, CA, in the late fall. With the increasing investments in expanding its footprint, Bowlero is well-positioned to add value to shareholders, pay down debt, and undertake general corporate purposes.
What May Hinder the Stock's Momentum?
As Bowlero undertakes various strategic investments, organic as well as inorganic, it is bound to come across additional expenses that likely take a toll on its bottom-line performance. During the third quarter of fiscal 2024, the company’s total operating expense increased 11% year over year to $40.8 million, primarily driven by a 10% increase in selling, general and administrative (SG&A) expenses to $39.5 million.
Furthermore, the company is subject to various weather-related challenges, especially when it comes to foot traffic counts. As of Mar 31, 2024, the same-store revenues declined 2.1% year over year. Along with other factors, the downtrend was driven by adverse weather conditions in January that led to a reduction in foot traffic.
Estimate Trend Revision
The Zacks Consensus Estimate of the company's fourth-quarter fiscal 2024 earnings per share (EPS) has trended upward to 1 cent from break-even earnings over the past 30 days. The estimated figure indicates 111.1% growth from the prior year’s reported levels. Over the said time frame, although the consensus estimate for fiscal 2025 EPS has moved south to 32 cents from 33 cents, it indicates a whopping 260.9% year-over-year growth. This bullish trend signifies the optimism of investors and probable consideration in their portfolios.
EPS Trend
Image Source: Zacks Investment Research
Inclusion in Portfolio – Yay or Nay?
Bowlero has significantly outperformed than few of the other industry players, including Manchester United plc (MANU - Free Report) , The Madison Square Garden Company Corp. (MSGS - Free Report) , and Live Nation Entertainment, Inc. (LYV - Free Report) . In the past three months, shares of MANU and MSGS have gained 6.8% and 4.8%, respectively, while shares of LYV have lost 7.3%.
Notably, BOWL’s trailing 12-month ROE is indicative of its growth potential. ROE for the trailing 12 months is 330.5%, much higher than the industry’s 2.7%, reflecting the company’s efficient usage of shareholders’ funds.
On the other hand, the forward 12-month price-to-sales ratio of 1.72X is above the industry average of 1.43X. The overvaluation of the stock in comparison with its peers makes it difficult for investors to consider it under their portfolio.
From the above discussion, this Zacks Rank #3 (Hold) is sending mixed signals to the investors, clouding their judgment on the feasible action to be undertaken regarding it. The company’s business growth initiatives and accretive capital allocation strategies are fostering growth trends, while increased expense structure is marring the bottom line. However, given the estimated trend revision, it can be said that the company is on its way to redeeming its bottom-line growth. Existing shareholders should hold onto their current position with BOWL while the potential new investors can wait for a better entry point. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.