Life Time Fitness is planning to spin-off its large real estate holdings into a real estate investment trust (REIT) conversion later this month, KeyBanc said.
"We admittedly do not have any edge, leading us to prefer to move to the sidelines," analysts said.
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Although the firm believes that it is possible for the fitness club to achieve $70+ per share in the long term, assuming they proceed with the spin-off, analysts see potential upside from current levels being limited to roughly $60 per share in the near term, given the initial single-tenant, single-asset nature of the REIT.
In addition, KeyBanc noted that if the company either backs away from the spin-off or continues to delay the timeline of the proposed transaction, Life Time Fitness could face a larger downside of having their stock range below $50 per share.
Separately, TheStreet Ratings team rates LIFE TIME FITNESS INC as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:
"We rate LIFE TIME FITNESS INC (LTM) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, growth in earnings per share, reasonable valuation levels and expanding profit margins. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 7.9%. Since the same quarter one year prior, revenues slightly increased by 6.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 34.71% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, LTM should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- LIFE TIME FITNESS INC has improved earnings per share by 9.6% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, LIFE TIME FITNESS INC increased its bottom line by earning $2.93 versus $2.68 in the prior year. This year, the market expects an improvement in earnings ($3.01 versus $2.93).
- 37.08% is the gross profit margin for LIFE TIME FITNESS INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 10.21% trails the industry average.
- You can view the full analysis from the report here: LTM Ratings Report