On Monday, Roth/MKM initiated coverage on Xponential Fitness Inc (NYSE: XPOF), assigning a Buy rating and setting a price target of $22.00. The firm's decision follows the appointment of Mark King as the new CEO of the company. The analysts expressed their approval of the rapid and high-quality executive selection, noting that the company has maintained strong fundamentals during the leadership transition.
In their coverage, Roth/MKM highlighted the positive outlook presented by Xponential Fitness's management in recent conference presentations. The team at Xponential Fitness has indicated that the expansion of new units is aligned with previous goals, with expectations to open approximately 550 new locations at the midpoint. Additionally, average unit volumes (AUVs) have remained robust in the second quarter.
The company's performance in license sales has also been noteworthy, specifically mentioning the strength in Lindora license sales. This positive trend in operations is complemented by strategic portfolio management, evidenced by the recent divestiture of Row House. The analysts drew parallels to a similar move earlier in the year with the divestiture of Stride, suggesting that these actions represent sound management decisions by Xponential Fitness.
Roth/MKM's price target of $22.00 is based on a 9.3 times multiple of the company's forecasted FY25E EBITDA. This valuation reflects the firm's confidence in the fitness brand's growth trajectory and financial outlook.
In other recent news, Xponential Fitness Inc. has finalized the divestiture of its Row House brand to Extraordinary Brands as part of its strategic refocusing on its core brand portfolio. The company stated that this divestiture will not significantly impact its revenue or EBITDA for 2024, and its financial guidance remains unchanged.
Amid these developments, financial services firm Baird has reduced Xponential Fitness's stock price target from $14 to $10, maintaining a Neutral rating due to increased uncertainties including the recent resignation of CEO Anthony Geisler and ongoing investigations by regulatory authorities.
Lake Street Capital Markets also lowered its price target for Xponential Fitness shares to $23 from $32, despite the company's consistent performance in meeting or exceeding earnings estimates. The company's guidance remains steady despite recent investigations. Meanwhile, Piper Sandler reduced the company's price target to $9.00 from $12.00, maintaining a Neutral rating on the shares, reflecting uncertainties surrounding the company.
In other company news, Xponential Fitness announced the resignation of CEO Anthony Geisler. Interim CEO Brenda Morris will maintain leadership while the board conducts a search for a new CEO. Despite these changes, Xponential Fitness reported a record high membership count of 796,000 in April, indicating strong brand appeal.
InvestingPro Insights
Xponential Fitness Inc (NYSE: XPOF) has been navigating through interesting times, and recent data from InvestingPro provides additional context to the company's financial standing and market performance. With an adjusted market capitalization of $677.33 million and impressive gross profit margins of 69.61% over the last twelve months as of Q1 2024, XPOF demonstrates a strong ability to generate revenue efficiently. Additionally, the company's price-to-earnings (P/E) ratio stands at a modest 6.3, suggesting that the stock might be undervalued when compared to industry peers.
InvestingPro Tips highlight that XPOF's management has been actively engaged in share buybacks, a move that often signals leadership's confidence in the company's prospects. Moreover, XPOF has shown a strong return over the last month with a 28.07% price total return, which could catch the eye of investors looking for recent positive momentum. On the flip side, it's worth noting that while analysts predict the company will be profitable this year, five analysts have revised their earnings expectations downwards for the upcoming period, indicating potential headwinds or a conservative outlook.
For investors seeking a deeper dive into XPOF's performance and future prospects, InvestingPro offers additional tips and metrics. By using the coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription to access these insights. The platform currently lists 11 additional InvestingPro Tips for XPOF, providing a comprehensive analysis for informed investment decisions.
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