Jefferies says it’s “bowling for a strike” with Bowlero shares. Analyst Randal Konik initiated coverage of the bowling center operator with a buy rating in a report issued Wednesday. Bowling is the largest participatory sport in the U.S., Konik noted, with more than 70 million annual participants — roughly three times more than golf. “Bowlero is the leader in the highly fragmented bowling industry, with 327 locations, or > 20x the nearest competitor. We believe Bowlero’s size gives it a significant advantage over competitors in terms of brand awareness and economies of scale (i.e. food costs),” Konik wrote. “As the company continues to consolidate the U.S. bowling industry (via new acquisitions and greenfield builds) and grows its brand awareness, we see a substantial opportunity for top- and bottom-line growth ahead,” Konik added. Jefferies has a $23 price target on Bowlero shares, implying that the stock could soar 51% from where it closed Tuesday. Konik believes Bowlero has “significant white space opportunity” both in the U.S. and internationally. The analyst said out of the approximately 3,500 independently operated bowling centers in the U.S., Bowlero could potentially acquire about 1,000. At the same time, international markets are a “largely untapped opportunity” for the company. Shares of Bowlero rose as much as 5.4% by mid-afternoon Wednesday, reaching a session high. The stock has now gained 16% in 2023 after soaring 49% last year, but Jefferies says Bowlero’s valuation still remains attractive to investors. “We believe strong top-line results are likely to drive meaningful operating margin leverage on the company’s fixed cost base. Meanwhile, Bowlero continues to invest in technology to drive improved operating efficiencies at new and existing centers,” said Konik. “The Street underappreciates the potential upside from these initiatives, and we see robust [free cash flow] generation ahead,” he added. —CNBC’s Michael Bloom contributed to this report.
