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On Monday, Roth/MKM analysts lowered the stock rating for Lucky Strike Entertainment (NYSE: LUCK) from Buy to Neutral, adjusting the price target to $9.00 from the previous $13.00. The stock, currently trading at $8.77, has declined nearly 12% year-to-date and sits 41% below its 52-week high of $14.92. The downgrade reflects concerns over prolonged fundamental challenges facing the company. Analysts at Roth/MKM pointed to the potential for these issues to continue affecting the business for an extended period.
The analysts noted that while easier comparative figures toward the end of summer might provide some relief, the broader economic uncertainty could continue to impact the company’s Corporate Events segment negatively. They expressed reluctance in downgrading the shares, especially considering the stock’s significant underperformance compared to the market over the past year. According to InvestingPro data, the company operates with a significant debt burden and its short-term obligations exceed liquid assets, with a current ratio of 0.64.
Despite the underperformance, analysts believe that any expansion in the company’s stock multiple is unlikely until there are definitive signs of diminishing pressures. The revised price target of $9.00 is based on 6.5 times the firm’s forecasted adjusted EBITDA for the fiscal year 2026. InvestingPro analysis shows 8 additional key insights about LUCK’s financial health and growth prospects, available to subscribers.
The analysts’ statement highlighted that easing comps later in the year might offer some support, but the uncertainty in the economic environment poses a risk that could persist. They stated, "We don’t like downgrading with the shares having meaningfully underperformed the market in the last year, but multiple expansion is unlikely until there are clear signs pressures are lessening." Based on InvestingPro’s Fair Value analysis, the stock appears fairly valued at current levels, with analysts maintaining price targets ranging from $10 to $18.
The new price target represents a notable decrease from the previous target, underscoring the analysts’ adjusted expectations for Lucky Strike Entertainment’s financial performance in the coming years. The adjustment to $9.00 from $13.00 aligns with their view of the company’s adjusted EBITDA projections and the current economic landscape.
In other recent news, Lucky Strike Entertainment announced its Q1 2025 earnings, which fell short of analysts’ expectations for both earnings per share (EPS) and revenue. The company reported an EPS of $0.21, missing the forecasted $0.25, while revenue reached $339.9 million, below the anticipated $358.29 million. This marks a deviation from previous quarters where Lucky Strike typically met or exceeded projections. Despite these challenges, the company noted an 8% year-over-year increase in food sales, indicating a potential area of strength. The California market significantly impacted the decline in same-store sales, which fell by 5.6%. The company has also been facing headwinds in its corporate events segment due to tech sector layoffs. In a strategic move, Lucky Strike acquired Shipwreck Island in Panama City Beach, Florida, for $30 million, highlighting its ongoing investment in growth through acquisitions. The company has removed specific financial guidance due to market volatility but remains optimistic about improved performance in the upcoming summer months.
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