Life Time's (LTH) next major "inflection point" could come when operating cash flow fully funds capital spending, reducing its reliance on sale-leasebacks to support accelerated unit growth pipeline, UBS Securities said in a report Wednesday.
The firm believes Life Time could reach that "operating cash flow-capex equilibrium" earlier than the market expects, helped by earnings before interest, taxes, depreciation, and amortization growth from maturing clubs and new openings. By 2029, the firm estimates annual EBITDA could reach about $1.35 billion, with run-rate EBITDA approaching $1.4 billion.
As the company gets closer to internally funding unit growth, the firm expects its valuation multiple to "inflect further," with $300 million to $400 million of annual sale-leaseback proceeds potentially shifting toward shareholder returns, according to the report.
The firm also sees a "long runway for unit growth," supported by underpenetrated US markets and favorable health and wellness trends.
UBS maintained its buy rating and $57 per share price target on the stock.
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