Stifel Reiterates Buy Rating on Lucky Strike Entertainment (LUCK)

Stifel reiterated a Buy rating and $12.00 price target on Lucky Strike Entertainment (NYSE: LUCK).

The analyst commented, “While some might disagree with us, we view today’s news of this real estate transaction as a positive for LUCK shares over the long-term and potentially the shot in the arm this company needed to turn the negative narrative around on their story in the near-term. We would expect shares to react positively to this news as one of the major bear sticking points has been the company’s leverage profile. We believe this deal is around $5M accretive to FCF and will be immediately accretive to EPS. Our view is the more real estate that LUCK owns, the more flexibility they have with their capital structure. If you recall in 2023, LUCK did a sale-leaseback transaction with VICI Properties, Inc. (VICI/Yarmak) in which VICI paid LUCK ~$433M in gross proceeds while LUCK was paying VICI ~$32M in rent. So is tonight’s transaction a change in strategy? Doesn’t sound like it. We believe this deal was an opportunistic purchase and LUCK will eventually monetize these assets but needs to improve their operating performance first. If we go back and think about the VICI deal, that was $60M in EBITDAR versus $32M in rent or ~2x rent coverage with very mature assets. These 58 properties are generating ~$80M in EBITDAR but with only ~$21M in rent. In our opinion, these assets are over-covered and this deal will allow LUCK to improve the operations of these assets and then eventually monetize them. We don’t believe LUCK is in the game of owning real estate. We fully expect them to do other sale-lease back transactions but not until the assets are getting proper rent coverage.”

For an analyst ratings summary and ratings history on Lucky Strike Entertainment click here. For more ratings news on Lucky Strike Entertainment click here.

Shares of Lucky Strike Entertainment closed at $10.03 yesterday.

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