Xponential Fitness Undervalued: Analyst On Why Conservative FY26 Targets Are Good News For Investors

B. Riley Securities analyst Jeff Van Sinderen reiterated a Buy rating on the shares of Xponential Fitness Inc XPOF with a price target of $46.

Xponential provided FY26 operating targets for revenue of $405.0 million, AEBITDA of $190.0 million, 500 new studio openings, and North American system-wide sales of $2.330 billion.

The analyst believes that these targets reflect conservatism on the part of management that appears to have been misinterpreted by investors.

The company expects AEBITDA margin of about 35% in FY23, to break 40% in FY24, and 47% in FY26, which will be driven by a favorable margin mix within franchise revenue, increasing international revenue contribution, growing AUV and SG&A leverage, said the analyst.

The company is focused on increasing AUV that drives margin while leveraging support functions at the corporate level.

XPOF’s most recent acquisition was the purchase of BFT in October 2021. According to the analyst, the company acknowledges the need to bring in a sustainable core modality that will provide future growth, fit into the company’s omni-channel strategy, and promote member engagement.

Newer studio cohorts continue to ramp run-rate AUV faster than previous cohorts and mature cohorts continue to exhibit strong comps similar to younger studios, bolstering the expectation for average run-rate AUV to continue growing, observed the analyst.

The analyst said XPOF’s pipeline of sold licenses, including those contractually obligated to open, along with organic expansion in existing brands, provides four to five years of visibility.

Management will ultimately need to acquire additional brands to maintain the growth profile and is constantly evaluating potential targets globally, including businesses that have scaling opportunities and larger businesses that are heavily discounted, noted the analyst.

XPOF currently trades at 8x the analyst’s FY24 AEBITDA estimate. The EVs of the peer group companies represent a range of business sizes, with XPOF within the extremes of the range and near the small end of the range, said the analyst.

Price Action: XPOF shares are trading higher by 0.55% at $19.17 on the last check Thursday.