On Friday, Xponential Fitness Inc (NYSE:XPOF) experienced a revision in its stock outlook by an industry analyst. Stifel has revised the price target for the company to $18.00, down from the previous $20.00, while maintaining a Buy rating on the stock. The adjustment follows Xponential Fitness's report of second-quarter results that fell short of expectations. The company saw weaker comparative store sales and decreased revenue, attributed to a decline in merchandise sales due to softer consumer spending and a shortfall in equipment sales caused by fewer openings than anticipated.
The lowered revenue projections have resulted in a reduction of the company's financial guidance. The analyst noted concerns among investors regarding Xponential Fitness's projected annual closure rate of 3%-5% beyond the current year. Despite these concerns, the analyst suggests that this guidance may be excessively cautious rather than a reflection of the company's actual performance prospects.
The report highlighted the strength of Xponential Fitness's underlying franchise business, which continues to demonstrate robust average unit volume (AUV) and membership growth. The analyst also expressed optimism about the initial remarks from Mark King, the newly appointed CEO of Xponential Fitness. King's early evaluations of the business were seen as a positive sign by the analyst.
Furthermore, the company has openly acknowledged that the guidance reduction is partly to prepare for the transition in leadership. With this in mind, the analyst views the recent downturn in the company's stock as an opportunity for investors to purchase shares at a lower price. The belief remains that the core brands of Xponential Fitness are on solid ground, as indicated by the company's performance metrics and the new CEO's approach to the business.
In other recent news, Xponential Fitness Inc has seen a series of significant developments. The company recently missed second-quarter earnings estimates, leading Piper Sandler to reduce its price target to $13.00 while maintaining a Neutral rating. This adjustment follows Xponential Fitness's ongoing efforts to improve its situation, despite the larger macroeconomic environment and earlier operational issues.
The company also finalized the divestiture of its Row House brand to Extraordinary Brands, a move that aligns with its strategic refocusing on its core brand portfolio. This transition isn't expected to materially affect the company's revenue or EBITDA for 2024, with financial guidance remaining unchanged.
Furthermore, Xponential Fitness has undergone a leadership transition with the resignation of CEO Anthony Geisler and the appointment of Interim CEO Brenda Morris. Despite this, the company reported a record high membership count of 796,000 in April, indicating strong brand appeal.
In terms of analyst ratings, Roth/MKM initiated coverage on Xponential Fitness, assigning a Buy rating with a price target of $22.00, based on the company's strong fundamentals and growth trajectory. However, Baird reduced the company's stock price target from $14 to $10, maintaining a Neutral rating due to uncertainties including the CEO's resignation and ongoing investigations by regulatory authorities. Similarly, Lake Street Capital Markets lowered its price target to $23 from $32, despite the company's consistent performance in meeting or exceeding earnings estimates.
InvestingPro Insights
In light of the recent analyst revision for Xponential Fitness Inc (NYSE:XPOF), real-time data from InvestingPro provides additional context that may be useful for investors considering the company's stock. According to InvestingPro Data, Xponential Fitness boasts a market capitalization of $616.76 million, with an adjusted price-to-earnings (P/E) ratio for the last twelve months as of Q1 2024 sitting at a relatively low 16.65. This suggests that the stock could be undervalued compared to its earnings potential. The gross profit margin for the same period is notably high at 69.61%, reflecting the company's impressive ability to retain a significant portion of its revenue as gross profit.
InvestingPro Tips for XPOF highlight several key points that align with the analyst's optimistic view of the company's core business. Management's aggressive share buyback program and the prediction that the company will be profitable this year are positives that might interest potential investors. Furthermore, the stock has shown a strong return over the last three months, with a 26.81% price total return, and even more impressively, a 52.74% return over the last six months. These metrics indicate a significant rebound in investor confidence and market performance.
For those looking to delve deeper into the company's prospects, InvestingPro offers additional tips that could further inform investment decisions. There are a total of 9 InvestingPro Tips available for XPOF, which can be explored for more detailed analysis and insights.
Overall, while the company faces challenges, the InvestingPro data and tips suggest that Xponential Fitness may have underlying strengths that could make it an attractive opportunity for investors willing to look beyond the short-term hurdles. The company's solid gross profit margins and positive performance trends could be indicative of its resilience and potential for growth.
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