Life Time Group (LTH: NYSE)

Life Time Group (LTH) provides health, fitness, and wellness clubs and communities to members across the U.S. and Canada. LTH recently closed a $40 million sale and leaseback transaction, a move that CEO Bahram Akradi believes will significantly fuel the company’s future growth. He emphasized that such transactions are approached opportunistically to support growth and strengthen the balance sheet.

On the release of strong financial results, Akradi also expressed confidence in the company’s plan to be cash-flow positive, even after all capital expenditures, by the second quarter. Additionally, there are plans to reduce the net debt leverage ratio to 2.0 by the year-end. If these targets are achieved, the positive impact from debt reduction and increased cash flow is expected to be reflected in LTH’s stock price.

The company’s optimistic outlook is further supported by substantial insider accumulation. Akradi himself recently purchased $654,000 worth of stock at a price of $16.76, contributing to a total insider purchase of 216,360 shares valued at $3.2 million over the last twelve months. We are bullish on LTH above $20.00-$21.00, with an upside target of $35.00-$36.00.

Carvana (CVNA: NYSE)

Carvana (CVNA) operates an e-commerce platform for buying and selling used vehicles online. After acquiring ADESA’s U.S. physical auction business in 2022, Carvana became the second-largest used car company in the U.S. This acquisition allows the company to leverage synergistic effects, transitioning into a more lucrative marketplace business model. The shift is expected to grow its fee-based used car marketplace, offering much higher profit margins compared to its traditional retail used car business.

Carvana has demonstrated its ability to outperform competitors like CarMax and AutoNation in terms of gross margin and gross profit per unit, thanks to its strong online presence and consumer-friendly platform. The company has also successfully cut over $1.1 billion in annualized SG&A expenses from its operations since early 2022, with continued improvements into 2024, focusing on efficient and profitable growth.

In addition, Carvana’s management has reached a deal with creditors to extend loan maturities and reduce interest payments, providing crucial financial flexibility. This move underscores the management’s strong execution capabilities, making the stock an attractive long-term investment.

We are bullish on CVNA above $116.00-$118.00, with an upside target of $230.00-$240.00.