Pickleball hasn't just taken the U.S. by storm in recent years. It's created an entirely new mini-industry boom within the sports equipment market.
The hybrid sport, which combines elements of tennis and table tennis, maintained its status as America's fastest-growing sport for the third consecutive year in 2023, according to the Sports & Fitness Industry Association’s (SFIA) Topline Participation Report. The statistics are staggering, with pickleball participation increasing 85.7% year-over-year and 158.6% over three years.
There are now more than 36.5 million adult Americans, or 14% of the population, who have played the sport at least once in the last year. That's according to the 2023 APP Pickleball Participation Report, conducted by YouGov on behalf of the Association of Pickleball Professionals (APP), between August 2021 to August 2022. Furthermore, 8.5 million individuals played pickleball eight times or more in that same period.
Notably, 45% of the 36.5 million total players expressed their intention to play pickleball more often in the next six months. Plus, the sport is especially popular among younger demographics, with data showing that players under 24 had the fastest growth rate from 2020 to 2021. This suggests a sustained and potentially growing interest in pickleball - and indeed, industry forecasts project a compound annual growth rate (CAGR) of 10.19% for the global pickleball market over the next five years, with expectations to reach $2.36 billion by 2028.
So, how can investors tap into this trend? Here's a look at two top stocks set to benefit from the pickleball revolution.
Pickleball Stock #1: Life Time Group Holdings (LTH)
For those looking to invest in the pickleball phenomenon, Life Time Group Holdings (LTH) is a company worth considering. Life Time owns a network of over 160 athletic country clubs across the U.S. and Canada, and currently boasts the largest network of pickleball courts in the country. The company operates 530 permanent pickleball courts, with plans to add 75 more by January 2024, and 1,000 by the end of 2024. Earlier this month, Life Time announced the groundbreaking of its first ground-up pickleball location in Minnesota.
When Life Time announced its financial results for the fiscal second quarter ended June 30, there were several key highlights. Revenue increased 21.8% to $561.7 million compared to the same period in 2022. Net income surged to $17.0 million, reversing a net loss of $2.3 million in the second quarter of 2022. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were up 115.5% to $136.0 million from $63.1 million.
Looking ahead, Life Time expects full-year net income to range between $75-$83 million for 2023, and the pickleball giant hiked its adjusted EBITDA to a range of $510-$520 million.
The bottom-line results fell short of expectations, but the post-event pullback in Life Time shares could present a buying opportunity - particularly since analysts seem to like the prospects for LTH going forward. The consensus rating among 10 analysts tracking the stock is a Moderate Buy, and the average 12-month price target of $23.10 implies expected upside of 43.5% from current levels.
Pickleball Stock #2: Skechers (SKX)
Another promising investment option is Skechers (SKX) - a company that has not only embraced pickleball, but is now the sport's official sponsor.
The shoe company's involvement with the sport began with the launch of its Skechers Viper Court offering, which received a positive response from the pickleball community. Now, Skechers is the Official Footwear Sponsor of every major tour and organization in North America, including USA Pickleball and the Carvana Professional Pickleball Association (PPA) Tour, as well as the 2023 English OPEN and English Nationals pickleball tournaments.
In its most recent earnings report, Skechers reported record quarterly sales of $2.01 billion, a year-over-year increase of 7.7%, and diluted earnings per share of $0.98, up 69% from the year-ago period. The bottom-line results topped analysts' expectations, which called for earnings of just $0.52 per share. Further, the company posted substantial 29.1% growth in Direct-to-Consumer sales.
Out of the 9 analysts tracking SKX, 6 call it a Strong Buy and 1 deems it a Moderate Buy, with only 2 Holds - and not a single Sell rating. The stock has a consensus rating of Strong Buy and an average 12-month price target of $60, implying expected upside of more than 22% from current levels.
Pickleball as a Long-Term Investment
Pickleball's remarkable growth projections, coupled with its broad appeal and ongoing expansion around the world, make it an intriguing investment opportunity.
Both LTH and SKX are buy-rated stocks with strong footholds in the pickleball market, making them top choices for investors looking to add some exposure to the sport to their portfolios.
Of course, as with any investment, it's essential to conduct thorough research, consider your financial goals and risk tolerance, and consult with a financial advisor before making any decisions. While pickleball's current trajectory is impressive, diversification remains a prudent strategy for long-term financial success.
On the date of publication, Amy Legate-Wolfe did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
