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Investing.com - Lucky Strike Entertainment (NYSE:LUCK) stock is gaining after Stifel reiterated its Buy rating and $12.00 price target on the company. The stock, currently trading at $10.03, appears overvalued according to InvestingPro analysis, which offers 12+ additional exclusive insights about LUCK’s financial health and valuation.
Stifel views the recently announced real estate transaction as a positive for LUCK shares over the long term, potentially helping to shift the negative narrative surrounding the company. The firm expects the deal to be approximately $5 million accretive to free cash flow and immediately accretive to earnings per share. This is particularly significant given the company’s current debt burden of $3.04 billion and concerning current ratio of 0.64, as revealed by InvestingPro data.
The transaction involves 58 properties that generate approximately $80 million in EBITDAR with only about $21 million in rent. Stifel believes these assets are over-covered, and the deal will allow Lucky Strike to improve operations before eventually monetizing them.
This move follows Lucky Strike’s 2023 sale-leaseback transaction with VICI Properties (NYSE:VICI), Inc., in which VICI paid Lucky Strike approximately $433 million in gross proceeds while Lucky Strike paid VICI about $32 million in rent.
Stifel does not view this as a change in strategy but rather an opportunistic purchase, noting that Lucky Strike is not primarily focused on owning real estate and will likely pursue additional sale-leaseback transactions once the assets achieve proper rent coverage.
In other recent news, Lucky Strike Entertainment has acquired the real estate of 58 of its venues for $306 million, transitioning from tenant to owner and eliminating future lease inflation risks. This acquisition, financed through a $230 million bridge facility, revolving credit line, and cash on hand, is expected to be immediately beneficial to earnings and cash flow. Texas Capital Securities has initiated a Buy rating on Lucky Strike with a $14.00 price target, highlighting potential improvements in same-store sales and operating efficiencies. Meanwhile, Stifel has lowered its price target for Lucky Strike to $12.00 due to challenges in the events business but maintains a Buy rating, noting potential catalysts for improvement in the latter half of 2025. Truist Securities reiterated its Buy rating with an $11.00 price target, citing improved consumer spending and potential for accelerated EBITDA growth. Additionally, Lucky Strike has expanded its Board of Directors by appointing Richard Born and Jason Harinstein, bringing expertise in hospitality, real estate, finance, and technology. These developments reflect ongoing strategic shifts and potential growth opportunities for the company.
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