Bowlero In

Bowlero, Inc. (NYSE: BOWL) is an operator of bowling entertainment centers. The Company operates traditional bowling centers and more upscale entertainment concepts with lounge seating, arcades, enhanced food, and beverage offerings. The Company also provides customer service for individuals and group events, as well as hosting and overseeing professional and non-professional bowling tournaments and related broadcasting.

Recent Business Highlights

• First Quarter Financial Performance: The company's first-quarter financial results revealed several key highlights. Notably, revenue experienced a slight dip of 1.2% to USD 227.4 million compared to the previous year. However, the quarter exhibited a substantial 53.1% increase compared to the same period in fiscal year 2020 (1QFY20). When excluding Service Fee Revenue, there was a 0.3% uptick in revenue to USD 225.8 million versus the previous year, showcasing an impressive 52.0% surge versus 1QFY20. Although Total Bowling Center Revenue faced a 0.7% decrease compared to the previous year, it showcased an extraordinary 52.9% rise compared to 1QFY20. Despite a 5.5% decline in Same Store Revenue from the previous year, it demonstrated a robust growth of 27.1% versus 1QFY20. The company reported net income of USD 18.2 million, a significant improvement from the previous year's loss of USD 33.5 million and a loss of USD 19.7 million in 1QFY20. Adjusted EBITDA amounted to USD 52.1 million, down from the prior year's USD 65.3 million but marked a substantial increase from USD 24.9 million in 1QFY20. The quarter also witnessed the addition of 18 centers, including 17 acquisitions and one new build, bringing the total operational centers to 350 as of November 7, 2023.
• Strategic Business Transformations: Post the first quarter, the company engaged in a pivotal transaction with VICI Properties Inc. on October 19, 2023. This transaction involved the transfer of land and real estate assets of 38 bowling entertainment centers, amounting to an aggregate value of USD 432.9 million. CEO and President, Thomas Shannon, highlighted that the first quarter aligned with expectations, mentioning strategic testing of promotions and pricing structures that temporarily impacted same-store revenue. He expressed satisfaction with the positive turnaround in mid-October and emphasized the company's commitment to achieving double-digit revenue growth in the current fiscal year. The quarter also marked transformative changes, including a partnership with VICI Properties through a sale-leaseback of 38 properties and strategic acquisitions like the Lucky Strike brand and additional premium centers.
• Share Repurchase Program: During the first quarter, the Share Repurchase Program remained active, with the company repurchasing 12.1 million shares of Class A common stock, bringing the total common shares acquired under the program to 23.4 million. Pro forma calculations for additional Class A common stock repurchases after the quarter-end bring the total outstanding Class A and Class B shares to 151,287,782 as of November 1, 2023.
• Fiscal Year 2024 and Second Quarter 2024 Guidance: Looking ahead, the company reiterated its financial guidance for fiscal year 2024, anticipating a 10% to 15% increase in revenue, excluding USD 21 million of Service Fee Revenue from the prior year. This translates to an expected revenue range of USD 1.14 billion to USD 1.19 billion. The projected Adjusted EBITDA margin is 32% to 34%, equivalent to an expected Adjusted EBITDA range of USD 365 million to USD 405 million. Second-quarter fiscal year 2024 guidance includes Revenue Excluding Service Fee Revenue of USD 295 million to USD 310 million and an expected Adjusted EBITDA of USD 100 million to USD 110 million. The company outlines a substantial reinvestment plan for fiscal year 2024, allocating over USD 160 million to acquisitions, USD 40 million to new builds, and USD 75 million to conversions.

Technical Observation (on the daily chart)

The stock broke above an important resistance zone of USD 11.00-USD12.00 in the second half of December 2023, with the price retesting those major support levels, with expectations of a further upward continuation after such a healthy correction. The Relative Strength Index (RSI) over a 14-day period stands at 44.85, indicating a state of potential consolidation or a short-term upward momentum. Additionally, the stock's current positioning is between both the 21-day Simple Moving Average (SMA) and the 50-day SMA, which may serve as dynamic short-term resistance and support level respectively.

As per the above-mentioned price action, momentum in the stock over the last month, and technical indicators analysis, a ‘BUY’ rating has been given Bowlero, Inc. (NYSE: BOWL) at the current market price of USD 11.92 as of January 17, 2024, at 07:05 am PST. 

Individuals can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing. 

Related Risk: This report may be looked at from a high-risk perspective and a recommendation is provided for a short duration. This report is solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc. 

How to Read the Charts?

The yellow colour line reflects the 21-period simple moving average (SMA) while the blue line indicates the 50- period simple moving average (SMA). SMA helps to identify existing price trends. If the prices are trading above the 21-period and 50-period moving average, then it shows prices are currently trading in a bullish trend.

The orange colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

The red and green colour bars in the chart’s lower segment show the volume of the stock. The volume is the number of shares that changed hands during a given day. Stocks with high volumes are more liquid than stocks with lesser volume as liquidity in stocks helps with easier and faster execution of the order.

The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock. 

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock. 

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices. 

Abbreviations

CMP: Current Market Price

SMA: Simple Moving Average

RSI: Relative Strength Index

USD: United States dollar 

Note: Trading decisions require a thorough analysis by individual. Technical reports in general chart out metrics that may be assessed by individuals before any stock evaluation. The above are illustrative analytical factors used for evaluating the stocks; other parameters can be looked at along with additional risks per se. Past performance is neither an indicator nor a guarantee of future performance. 

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance level is January 17, 2024. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Target Price refers to a price level that the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the New York Stock Exchange (NYSE), NASDAQ Capital Markets (NASDAQ), and or REFINITIV. Typically, all sources (NYSE, NASDAQ, or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’