What happened
Week to date, shares of Xponential Fitness (XPOF 7.50%) were down 13% through Thursday's market close, according to data provided by S&P Global Market Intelligence.
The boutique fitness franchisor updated investors on its long-term growth targets this week. By 2026, the company expects to reach $2.33 billion in systemwide sales with revenue of $405 million. This includes opening 500 new studios. The company also announced a new partnership with Gympass, a leading corporate well-being platform.
The company has been enjoying tremendous momentum in recent years, but the growth suggested for the next few years was apparently not enough to please the market.
NYSE: XPOF
Key Data Points
So what
Xponential Fitness has grown revenue about fivefold over the last five years. It is on pace to achieve 2023 revenue of $295 million to $305 million, representing growth of approximately 22% over last year. The $405 million target for 2026 would imply annualized growth consistent with those trends.
The stock was already pricing in high growth expectations, with an expensive forward price-to-earnings (P/E) ratio of 36 after the sell-off. But the high P/E seems justified, considering how well the company has been executing its growth strategy in a difficult macroeconomic environment.
In the most recent quarter, Xponential Fitness reported same-store sales growth in North America of 15%. What's more, it is delivering profitable growth. It turned a year-ago loss of $0.07 per share into a profit of $0.05 in the second quarter.
Now what
The dip in the share price could be a good buying opportunity. Xponential Fitness just renewed its partnership with Lululemon Athletica and signed a master franchise agreement in France as the company executes its international expansion strategy.
