Urban And Digital Trends Will Drive Holistic Wellness Expansion

Key Takeaways

• Expansion into urban and suburban markets and new living and working concepts is broadening the customer base and supporting enduring revenue growth.
  
• Focus on digital platforms and high-margin wellness services is increasing member engagement, revenues, and profit margins while reducing member turnover.
  
• Rising digital fitness trends, demographic shifts, operational risks, and intensifying competition threaten the sustainability and profitability of Life Time Group’s premium club business model.

Catalysts

Provides health, fitness, and wellness experiences to a community of individual members in the United States and Canada.

• Life Time is positioned to capture rising demand for high-quality health and wellness experiences as consumers increasingly prioritize fitness and longevity, supporting sustained growth in both membership revenue and higher average revenue per member over the coming years.
  
• The company is aggressively expanding into high-growth urban and suburban markets, leveraging a robust pipeline of new club openings as well as asset-light models such as Life Time Work and Life Time Living, significantly broadening its addressable market and supporting topline expansion and long-term earnings stability.
  
• Intensifying focus on ancillary, high-margin services—such as personal training, spa and recovery offerings, kids’ programming, and nutritional supplements—is meaningfully boosting in-center revenue and overall net margins, both through higher engagement and increased revenue per member.
  
• Accelerated investment in digital platforms, including the LT Digital ecosystem, Life Time’s AI-driven companion (L.AI.C), and a rapidly growing digital-only subscriber base, is increasing customer reach, retention, and cross-sell opportunities, which in turn will enhance future revenue and reduce member churn, supporting long-term margin improvement.
  
• Scaling of innovative health solutions, such as the MIORA longevity business and high-growth LTH nutritional products—with both showing strong early traction and long-term billion-dollar revenue potential—will create new, recurring revenue streams and provide additional upside to both earnings and valuation.

Life Time Group Holdings Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Life Time Group Holdings compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Life Time Group Holdings's revenue will grow by 12.4% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 7.6% today to 12.0% in 3 years time.
• The bullish analysts expect earnings to reach $467.4 million (and earnings per share of $2.05) by about July 2028, up from $207.5 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 33.9x on those 2028 earnings, up from 30.6x today. This future PE is greater than the current PE for the US Hospitality industry at 24.5x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.58%, as per the Simply Wall St company report.

Life Time Group Holdings Future Earnings Per Share Growth

Risks

• The accelerating shift toward digital and at-home fitness, as well as the growing adoption of AI-powered health and wellness solutions, threaten long-term demand for expensive physical club memberships, potentially reducing Life Time Group’s future revenue and diminishing the perceived value of its core offering.
  
• Demographic changes such as urban migration and a shrinking middle class constrain the target audience for Life Time’s premium, luxury club model, risking stagnant or declining membership growth and placing pressure on long-term earnings.
  
• The company’s high leverage, significant real estate commitments, and ongoing aggressive expansion strategy with numerous new club openings leave it exposed to economic downturns or demand shocks, which could overwhelm revenues with fixed costs and negatively impact net margins and earnings.
  
• Persistent industry-wide challenges, including rising labor costs and labor shortages in service sectors, are likely to raise operating expenses faster than the company can offset through price increases or efficiency gains, squeezing profitability and reducing net margin.
  
• Increased competition from boutique fitness studios, digital fitness platforms, and growing consumer interest in asset-light, flexible wellness solutions could drive higher customer churn and acquisition costs, eroding profit margins and constraining Life Time Group’s ability to grow revenue and earnings.

Valuation

• The assumed bullish price target for Life Time Group Holdings is $45.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Life Time Group Holdings's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $45.0, and the most bearish reporting a price target of just $28.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $3.9 billion, earnings will come to $467.4 million, and it would be trading on a PE ratio of 33.9x, assuming you use a discount rate of 9.6%.
• Given the current share price of $28.95, the bullish analyst price target of $45.0 is 35.7% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.