Expanding Premium Club Openings Will Shape Long-Term Wellness Markets

Key Takeaways

• Expansion into affluent markets and enhancement of premium wellness services support sustained membership and revenue growth.
  
• Technology investments and digital wellness offerings drive member engagement, higher margins, and increased customer lifetime value.
  
• Heavy capital dependence, premium focus, operational limits, and competition from digital wellness pose significant risks to growth, revenue stability, and successful diversification.

Catalysts

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

• The expanding pipeline of new and larger club openings in affluent and high-density markets positions Life Time for sustained membership and top-line revenue growth, benefiting from the growing consumer demand for premium health, wellness, and lifestyle experiences.
  
• Accelerating growth in ancillary, higher-margin services-including personal training, Life Time Digital offerings, nutritional supplements, and health/wellness programs-supports increased average revenue per member and improved net margins as consumer expectations shift toward holistic wellness.
  
• Continued investment in technology, highlighted by the growth of Life Time Digital accounts and the launch of new digital/AI-driven wellness tools, enhances member engagement, retention, and cross-sell opportunities, raising overall lifetime customer value and supporting future earnings.
  
• Demographic trends such as the aging but increasingly active population are expanding Life Time's addressable market for both core memberships and new wellness-driven programs, translating into long-term revenue and membership growth potential.
  
• Strong balance sheet improvements, positive free cash flow generation, and access to attractive sale-leaseback financing provide a foundation for capital-efficient growth and reduced financial risk, which may unlock higher future earnings and margin stability.

Life Time Group Holdings Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Life Time Group Holdings's revenue will grow by 10.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from 8.0% today to 12.1% in 3 years time.
• Analysts expect earnings to reach $459.7 million (and earnings per share of $1.74) by about August 2028, up from $226.8 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 30.8x on those 2028 earnings, up from 26.2x today. This future PE is greater than the current PE for the US Hospitality industry at 21.6x.
• 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 10.45%, as per the Simply Wall St company report.

Life Time Group Holdings Future Earnings Per Share Growth

Risks

• Life Time's aggressive club expansion strategy-including larger, ground-up developments-requires substantial capital expenditures and relies heavily on continued access to sale-leaseback markets; any tightening in real estate capital, higher construction costs, or rising interest rates could reduce free cash flow, increase leverage, and pressure net margins.
  
• Sustained price increases and premium positioning focus the brand on affluent demographics, raising risk in the event of economic downturns or growing wealth inequality; this could lead to disproportionate membership attrition and revenue volatility if consumer discretionary spend contracts.
  
• The company's optimism regarding sustained in-center and ancillary revenue growth (personal training, supplements, digital, MIORA, spa, F&B) depends on continued high member utilization; secular trends toward at-home fitness and digital wellness could erode demand for physical club attendance, impacting future revenue per member and overall earnings.
  
• Management's focus on maintaining experience quality through controlled membership and club crowding (e.g., use of waitlists) means there are limits on near-term member growth; this operational discipline could constrain top-line growth if new club openings are delayed or pipeline execution falters, lowering revenue expectations.
  
• The ongoing addition of new wellness offerings (e.g., MIORA, L.AI.C, and Life Time Digital) involves significant execution and technology investment risk; if these initiatives fail to scale, are outpaced by more nimble competitors, or encounter regulatory or consumer trust obstacles, the anticipated diversification of revenue and support for net income may not materialize.

Valuation

• The analysts have a consensus price target of $39.0 for Life Time Group Holdings based on their expectations of its future earnings growth, profit margins and other risk factors. 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 $32.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $3.8 billion, earnings will come to $459.7 million, and it would be trading on a PE ratio of 30.8x, assuming you use a discount rate of 10.4%.
  
• Given the current share price of $26.99, the analyst price target of $39.0 is 30.8% 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.