On Monday, Lake Street Capital Markets adjusted its share price target for Xponential Fitness Inc (NYSE:XPOF), reducing it to $23.00 from the previous $32.00.
Despite the revision, the firm has maintained a Buy rating on the company's shares. This adjustment comes in the wake of a significant decline in the stock's value last Friday, which the analyst believes was an excessive reaction to the news.
The sell-off that resulted in a more than 30% drop in Xponential Fitness's stock price brought the valuation down to approximately 3.5 times the projected earnings before interest, taxes, depreciation, and amortization (EBITDA) for the next year.
The analyst's confidence in the business is sustained by the company's consistent guidance and its history of meeting or exceeding financial estimates.
The analyst points out that the primary factor influencing the recent sell-off was the uncertainty surrounding an ongoing investigation, rather than the company's financial health or fundamentals.
Since June 2023, negative sentiment and allegations have surrounded Xponential Fitness, prompting a regulatory examination which the analyst sees as a due process.
The revised price target of $23 reflects the potential continuing impact on the stock until further details about the investigations are made public. While acknowledging the likelihood of near-term volatility, Lake Street Capital Markets anticipates that the risk/reward proposition for Xponential Fitness is currently appealing at its present valuation, hence the decision to uphold a Buy rating.
InvestingPro Insights
As Xponential Fitness (NYSE:XPOF) navigates through its recent stock price turbulence, insights from InvestingPro reveal some critical metrics that could be of interest to investors. The company's market capitalization stands at $407.65 million, and it is trading at an earnings multiple of 8.27 based on the last twelve months as of Q1 2024. This P/E ratio suggests a more favorable valuation compared to the industry average. Furthermore, the company boasts a substantial gross profit margin of 69.61% for the same period, indicating efficient operations and strong pricing power.
InvestingPro Tips highlight that XPOF's management has been actively repurchasing shares, which could signal confidence in the company's future prospects. Additionally, the stock's RSI indicates it is currently in oversold territory, suggesting it might be undervalued. It's worth noting that the stock has experienced significant price volatility, which could present opportunities for investors with a higher risk tolerance. For those interested in further analysis, there are 12 additional InvestingPro Tips available, which can be accessed with the coupon code PRONEWS24 for an extra 10% off a yearly or biyearly Pro and Pro+ subscription.
While the recent price target adjustment by Lake Street Capital Markets reflects caution due to ongoing investigations, the InvestingPro data and tips provide a broader context for evaluating Xponential Fitness's current market position. Investors may find these insights valuable as they assess the company's potential for profitability and its standing in the market.
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