Down 62% from its peak, is Soho House (SHCO) stock a buy?

By:
on Mar 30, 2024
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  • Soho House & Co share price has dropped by over 60% from its all-time high.
  • There are concerns about the company’s growth and profitability.
  • Soho has never turned a profit, 29 years after launch.

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Soho House & Co (NYSE: SHCO) stock price has struggled since going public in 2021 as investors question the company’s growth and elevated losses. It initially rose to $14.85 after going public and has now shed about 62% of this value. This retreat has brought its total market cap to $1.1 billion or $26.1 million per club.

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Growth at the expense of profits

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Soho House & Co is one of the biggest membership clubs in the world. In the past two decades, the company has launched over 40 clubs in key cities in North America, Europe, and Asia. 

Soho has been growing steadily over the years as demand for private clubs has risen around the world. Its annual revenue rose from $479 million in 2019 to over $843 million in 2023.

The most recent financials showed that Soho’s revenue rose by 7.5% in the fourth quarter, missing estimates by $11.1 million. Most of this revenue came from its memberships followed by its in-house services. 

Soho House is also growing its number of members while churn is moderating. It added 30,000 members in 2023, bringing the total to over 193k. Including its digital members, the company has over 259k users. 

This trend will likely continue as people test these clubs. However, Soho has paused some memberships in key cities amid rising overcrowding concerns.

Soho House is seeing strong demand in emerging markets, where the middle class is still growing. For example, it added over 2,000 members in its new Mexico City location, meaning that it could replicate this success.

The biggest concern among investors is Soho House’s profitability since the company has never turned a profit, 29 years after launch. It made a $117 million loss in 2023, down from 220 million a year earlier. 

While losses are narrowing, the company will take a few more years. Analysts expect that Soho’s revenue will rise to $1.24 billion in 2024 and $1.37 billion in 2025. Despite this growth, they see its annual loss moving to 22 cents and 3 cents in the same period.

Soho House & Co stock price analysis

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Soho stock

Soho House & Co is not followed well by Wall Street analysts. There are only six analysts who have provided their rating for the stock, with three of them having a strong buy rating and 2 of them having a buy rating. MKM, Citigroup, and HSBC have a buy rating on the stock.

Turning to the daily chart, we see that the SHCO share price has come under intense pressure in the past few weeks. It has dropped from $8.48 in September to $5.6 today. The stock remains below the lower side of the ascending channel.

It has also dropped below the 50-day moving average, signalling that bears are still in control. Therefore, the outlook for the stock is bearish, with the next point to watch being at $4.36, its lowest point this year.

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