By Jarrett Banks
Shares of Bowlero Corp. (NYSE: BOWL) surged 10% on Tuesday after JPMorgan initiated coverage of with an overweight rating with a massive post-pandemic upside.
JPMorgan Analyst Kevin Heenan gave a $17 December 2023 price target, more than 50% higher than the closing price on Monday, based on market leadership and scale in the economically-attractive bowling industry, as well as structural P/L improvements with tailwinds exiting the pandemic.
JPMorgan cited Bowlero’s market leadership and scale in the economically attractive bowling industry, as well as a balanced multi-year financial profile for ~10% revenue, EBITDA growth and potential profit upside. Bowlero also has seen structural model improvement during COVID with tailwinds exiting the pandemic, and experienced, founder-led management, it said in research note.
“Bowlero operates a unique portfolio of assets in the bowling industry, supporting a flywheel for future growth and profitability,” Heenan wrote in the note. “This includes >300 largely upscale bowling centers, complemented by ownership of the PBA and various emerging gaming initiatives, all with the goal of driving the incremental visit and/or game bowled in order to the capture the nearly ~100% incremental margin flow-through.”
The U.S. bowling landscape is highly fragmented, with independent operators representing nearly 90% of the industry by center count, JPMorgan noted. Approximately 70 million people in the U.S. bowl each year, with 26 million guests bowling at one of Bowlero’s centers annually pre-pandemic.
“Bowlero is the largest player in the industry, holding ~8% share of the market by centers, with the next 4 largest players (Main Event, Lucky Strike, Strike & Spare, Pinstripes) collectively holding just 2% of industry share,” Heenan wrote. “Looking ahead – BOWL sees a ~800 US center opportunity (500 incremental units comprised of 300+ acquisitions and 200-300 new builds).”
Jarrett Banks, Editor-at-Large