On Holding (NYSE:ONON), European Wax Center (NASDAQ:EWCZ), and Xponential Fitness (NYSE:XPOF) lost ground today, and largely for the same reason. Though On Holding lost a lot more than Xponential Fitness did, and European Wax lost the least, all three still took a hit. The biggest reason is a sea change at Baird, which took a look at all three and suggested that each is starting to butt up against its maximum in valuation.
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Baird, via its team of analysts, told investors that it was a good time to use “…strength to further reduce exposure.” As a result, it lowered all three stocks from Buys to Holds, pointing out that consumer spending was on the decline as a whole.
However, Baird also noted that it had a positive view of all three stocks’ fundamentals. There wasn’t much inherently wrong with the stocks; it’s just that the environment in which they operated was becoming increasingly hazardous. For instance, Xponential recently partnered with Princess to bring several exercise classes to Princess ships. That’s a great diversification move, but in the end it only exposes Xponential to more potential declines in consumer spending.
European Wax, which lost the least today, also offers the worst potential. It’s a Moderate Buy by analyst consensus standards, but with an average price target of $20.33, it boasts just 9.07% upside potential. Meanwhile, Xponential Fitness offers 12.02% upside thanks to its average price target of $32.90 per share. Analysts currently rate it as a Strong Buy.
