Irvine, California-based fitness franchisor Xponential Fitness (New York Stock Exchange:XPOF) share price has fallen 56% over the past year. But the stock has risen 19% over the past five days, driven by strong fourth-quarter sales and plans to launch a $100 million share buyback. Despite recent volatility, XPOF’s growth potential has captured the attention of investors and financial analysts alike.
The unfolding Xponential journey
Xponential Fitness has earned a reputation for curating unique brands under its umbrella, including Club Pilates, Pure Barre, CycleBar, StretchLab, Row House, YogaSix Rumble, AKT, and STRIDE. The company’s main source of revenue is income from franchising these brands.
By the end of 2023, the company successfully operated 3,062 open studios around the world, and that number increased with 557 new studios within a year. This translates to an average of approximately 1.5 new studios opening each day. The company predicted that this momentum would continue until 2024.
Xponential Fitness’ most recent acquisition is a chain of clinics called Lindora that provides access to health treatments and weight loss drugs. The acquisition will allow the company to participate in Americans’ growing demand for longevity-focused treatments, such as vitamin infusions, biological age tests, and peptide injections.
Recent financial results
Xponential recently reported its fourth quarter results. The company’s earnings per share were $0.08, below the consensus estimate of $0.18. However, the company’s sales increased 26.6% year-on-year to approximately $90.2 million, exceeding analysts’ expectations of $81.71 million.
Sales increased as equipment and merchandise sales to franchisees exceeded expectations. However, the company’s operating margin and EPS fell short of Wall Street expectations as high-margin franchise revenue fell short of expectations.
Meanwhile, the company announced a new two-year, $100 million share buyback program that will use excess operating cash to buy back shares. XPOF stock rose significantly following this announcement, rising 26.6%.
Is Xponential Fitness a buy?
XPOF is trading towards the low end of its 52-week range of $8.30 to $33.58, with bullish technical indicators above its 20-day moving average price of $10.91 and 50-day moving average price of $11.42. . Interestingly, XPOF stock is trading below its five-year average (52.66x) on an EV to EBITDA basis (14.37x), so it could represent this level of value.
Xponential continues to draw optimistic forecasts from multiple research firms. Citigroup’s James Hardiman reiterated his buy recommendation and slightly lowered his price target to $21 from $23. He is optimistic about the company, citing its recovery and potential for impressive revenue growth.
Similarly, Lake Street’s Ryan Myers lowered his price target from $41 to $32, but maintained his rating on XPOF stock as a “buy” and gave a “buy” rating to Xponential on the back of strong Q4 results. He emphasized “high confidence.”
XPonential Fitness has a Wall Street consensus rating of Moderate Buy, based on 5 Buys and 3 Holds. The average price target of $22.75 suggests an upside of 68.1% from current levels.
long game
Xponential Fitness has successfully added a variety of health and wellness brands to its repertoire. XPOF’s future growth trajectory will depend on its ability to acquire and effectively manage this diversified portfolio and its inherent ability to adjust to wellness trends and market demands.
Given that most analysts recommend Buy and the stock is trading toward the lower end of its 52-week range, XPOF has potential for investors who want to play the long game and get ahead of recent volatility. present a unique value proposition.
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