Insights

Here’s what a top broker thinks of the Ardent Leisure Group (ASX:ALG) share price

This broker upgrades its rating on Ardent Leisure Group’s shares.
The post Here’s what a top broker thinks of the Ardent Leisure Group (ASX:ALG) share price appeared first on The Motley Fool Australia. –

Ardent shares are now exchanging hands at $1.50 apiece, up 0.33% on the opening of trade on Wednesday.

Zooming out, the Ardent Leisure Group (ASX: ALG) share price has soared firmly into the green over the last week. In the past seven days, shares in the theme park operator have climbed 54% up until the open on Wednesday.

Why is the Ardent Leisure Group share price climbing over the last week?

Investors have been buying Ardent shares after the company released its FY21 earnings report last week.

In it, Ardent recognised an approximate 2% decrease in revenue for the year but grew EBITDA by 166% to just over $67 million.

Ardent is also optimistic about realising the pent up demand for visitation of its theme parks as coronavirus begins to settle, and has four new centre openings scheduled for FY22.

What are analysts saying?

One leading broker JP Morgan believes the recent run-up in the Ardent Leisure share price could be a buying opportunity.

According to a note released to investors, JP Morgan has updated its modelling and also upgraded its rating on Ardent shares from underweight to overweight.

As such, it has increased its price target for the company’s shares from 75 cents to $1.75. This implies an upside potential of approximately 10% from Ardent’s opening price on Wednesday.

What did the broker say?

JP Morgan believes Ardent’s FY21 results have “invalidated a number of (its) key concerns” regarding the Ardent Leisure share price.

The investment bank previously held the posture that Ardent’s recovery was “being driven solely by government stimulus”.

Commenting on its reasoning, JP Morgan said:

Strong trading has continued into 4Q21 and early FY22 highlighting that demand is less stimulus led than we had thought. Secondly, with earnings now returned to record levels, this de-risks our concern that ALG’s private equity partner would be able to exercise their option over 51% of Main Event and reap the majority of the recovery upside.

It went on to add that “a sale of Main Event would see ALG move to a significant net cash position after a period of financial struggles which pre-dated the COVID-19 pandemic”.

As a result, the broker has updated its modelling to “reflect (Ardent’s) much better than expected FY21 result”.

Bringing it all together, this leading broker believes that investors can expect further strengths in the Ardent Leisure share price over the coming periods.

Ardent Leisure Group share price snapshot

The Ardent Leisure share price has gained 117% over the year to date, extending the gain over the previous 12 months to 252%.

In the past month alone, Ardent shares have climbed a further 53% into the green.

These results have far outpaced the S&P/ASX 200 Index (ASX: XJO)’s return of around 25% over the past year.

The post Here’s what a top broker thinks of the Ardent Leisure Group (ASX:ALG) share price appeared first on The Motley Fool Australia.

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More reading

Why Ardent Leisure, Blackmores, Clinuvel, & Qube shares are surging higher

Ardent Leisure (ASX:ALG) share price rockets 25% on FY21 earnings surge

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