Life Time Fitness could see volatility after results

NEW YORK, July 21 (BestGrowthStock) – Shares of Life Time Fitness
(LTM.N: ) could be vulnerable to weakness after a recent run-up,
as investors await earnings from the gym operator Thursday
morning.

After a rally of more than 60 percent since its February
intraday low, the stock has traded in a tight range in recent
months as it consolidates those gains. However, a significant
amount of bearish bets against the stock could add volatility
after results are released Thursday.

With analysts expecting to see solid numbers from Life
Time’s second-quarter results on Thursday, the stock could be
hurt by a “sell on the news” reaction, said Brian Nagle,
analyst at Oppenheimer & Co in New York.

Analysts are expecting the company to report earnings per
share of 52 cents, according to Thomson Reuters I/B/E/S.

“I think the quarter is going to be good, very much another
step forward for the company. I’m just a bit concerned about
how the market may react to the report in the very near term,”
Nagle said.

Life Time Fitness is trading at a slight premium to where
it normally does heading into quarterly earnings, said Nagle.
The stock’s relative price-to-earnings multiple is 1.32 times
earnings, the first time it has been so high prior to a release
since February 2008, suggesting it might be slightly
overvalued, he said.

The large amount of short bets against the stock could
exacerbate moves following the release. Short interest made up
20.8 percent of shares outstanding as of last week, according
to data specialist Data Explorers.

Short investors seek to profit from a falling stock, by
borrowing a share and selling it in the hopes of buying it back
at a lower price and pocketing the difference.

However, shorts can be squeezed out of their positions and
forced to buy if the stock rallies, amplifying gains.

Since the beginning of the year, Life Time Fitness has
surged about 44 percent, vastly outperforming the S&P midcap
hotels, restaurants and leisure industry index (.4GSPHRL: ),
which is up about 6 percent for the year.

“On a relative valuation basis, it’s gotten a little
expensive. In my mind, that means it’s going to be a little bit
more difficult to generate outperformance,” said Jaison Blair,
retailing analyst at Rochdale Research in Stamford,
Connecticut.

“Assuming we get a continuing consumer spending recovery, I
think the stock can trade higher from here.”

Positive technical signals also suggest there’s more upside
for shares. Momentum is in an uptrend, and the stock’s daily
moving average convergence-divergence (MACD), a good indicator
of short-term direction, generated a strong buy alert last
week.

However, shares have been in a tight range in recent
months, and in such ranges technical signals can become
crossed.

Life Time shares have encountered repeated resistance
around $38.00, which would mark a more than 5 percent gain from
where it was trading at $36.10 at midday Wednesday. It has also
seen support around $33.00.

Stock Market Research
(Reporting by Leah Schnurr; Additional reporting by Rodrigo
Campos; Editing by Eric Walsh)

Life Time Fitness could see volatility after results