Xpontential Fitness (NYSE:XPOF) shares surged more than 21% before Thursday’s opening bell after it was revealed it has been cleared by the Securities and Exchange Commission (SEC) following an 18-month investigation.
The company disclosed in a regulatory filing that the SEC wrapped up the probe without taking any enforcement action against the company, meaning that Xponential Fitness's financial practices and disclosures were found to be in compliance with regulatory standards.
The SEC's investigation into Xponential Fitness, which began in December 2023, focused on whether the company misrepresented its business model and key financial metrics to investors and franchisees.
Specifically, the inquiry looked into allegations that Xponential Fitness may have inflated revenue and profit projections, underestimated costs, and misled franchisees about the financial viability of individual franchises prior to signing franchise agreements.
Analysts at Jefferies expect investor sentiment towards the company to improve now that this major overhang has been removed.
“We believe XPOF’s portfolio of Scaled and Growth brands, along with domestic and international expansion opportunities, provides investors with a leading boutique fitness franchisor that has ample potential to further improve its market share.”
They also cited management’s recent initiatives, including a high-caliber leadership team and a franchisee-first approach, instilling greater discipline and operational focus across the business.
They noted that Xponential Fitness still trades at only 5 times the fiscal 2026 consensus EBITDA, a deep discount to peers such as Planet Fitness at 18x.
“XPOF’s valuation multiple has room to rise toward peer levels as the company executes on its growth plans,” they wrote.
This valuation dislocation versus Planet Fitness reflects considerable upside potential, Jefferies believes. The firm has a ‘Buy’ rating on the stock and $26 price target, implying upside of about 250%.
“With the SEC risk lifted and management executing on strategic priorities, we expect continued multiple expansion as investor confidence returns and XPOF’s results improve, narrowing the gap with peer valuations,” analysts concluded.
Shares of Xponential Fitness were up 21.3% premarket at $9.