Shares of bowling entertainment company Bowlero(NYSE: BOWL) crashed on Friday after the company reported financial results for its fiscal third quarter of 2024. As of 10:20 a.m. ET, Bowlero stock was down 18%.
A slow start led to a weak quarter
In Q3, Bowlero's revenue was only up 7% year over year to $338 million. The company benefited from new units contributing to the top line. By contrast, existing locations underperformed, with same-store sales falling 2.1%. Management said that bad weather led to poor traffic in January before same-store sales turned positive in the quarter's final two months.
In part due to the slow start in Q3, Bowlero's management updated its full-year financial guidance. For fiscal 2024, it had been forecasting 10% to 15% year-over-year growth. Now management says it will be on the low end of that guidance. It also says that it will be at the low end of guidance for adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).
Investors didn't like hearing that and Bowlero stock consequently fell.
Is Bowlero stock a good deal?
The low end of Bowlero's guidance calls for $365 million in adjusted EBITDA. For a company with an enterprise value of $3 billion as of this writing, that's still a substantial adjusted profit and makes Bowlero stock look like a good deal today.
That said, the bowling business isn't easy and turning a consistent profit is challenging. Moreover, Bowlero just branched out of its core competence by acquiring a water park in Illinois, which adds another layer of complexity.
Bowlero has made many shareholder-friendly moves since going public including paying dividends and repurchasing shares. But investors would need to be confident in this management team's ability to navigate a tough space before they choose to invest in the company.
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Jon Quast has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
