Analysts Cut Peloton Price Targets But Remain Impressed With Potential Growth

Zinger Key Points
  • One analyst said the company’s demand for its rental program is a positive sign, but is not enough.
  • New Peloton CEO Barry McCarthy plans to position the company for international growth.

Connected fitness company Peloton Interactive Inc PTON reported quarterly earnings Tuesday morning. The company missed revenue and earnings per share estimates and shares sold off. Here is what analysts are saying about the quarterly report.

The Peloton Analysts: Bank of America analyst Justin Post has a Buy rating and lowers the price target from $42 to $25.

Telsey analyst Dana Telsey has a Market Perform rating and lowers the price target from $28 to $15.

Needham analyst Bernie McTernan has a Buy rating and lowers the price target from $50 to $25.

JMP analyst Andrew Boone upgrades the rating on Peloton from Market Perform to Market Outperform and announces a $25 price target.

Related Link: Analyst Says Peloton Could Flash A Buy Signal Soon

The Analyst Takeaways: Post is lowering the price target and estimates on Peloton after the company’s earnings report.

“Everything on the table for sub growth in FY23. In the last two months, Peloton has launched lower hardware prices and tested a new hardware rental mode, and indicated early upticks in demand,” Post said.

The analyst said it is early to know if the new items and changes at the company are sustainable.

“We expect the company to have lower hardware prices, retail partnerships, a HW rental model and new equipment available ahead of the peak holiday season in FY23.”

Telsey said the company could be in the early stages of changing its strategic direction, which could take one to two years to complete.

“New CEO Barry McCarthy made it clear that cash burn has been higher than expected and addressing this is the near-term priority, which will limit investment to fund international expansion, among other areas,” Telsey said.

Telsey said the company’s demand for its rental program is a good start, but doesn’t think it’s enough.

“Given the lack of visibility into demand levels, profitability, and cash flow, we remain on the sidelines near-term.”

McTernan maintains a Buy rating on Peloton and points to several items supporting a bullish case.

“We continue to view PTON’s $1.3B of TTM subscription revenue with low churn and high margins driven by high quality content as the most compelling aspect of the company,” McTernan said.

The analyst points to a June $5 price increase as being important for the company as it navigates churn.

McTernan highlights an area of growth planned out by new McCarthy, which includes third-party retailers, digital subscriptions value, international growth and fitness-as-a-service.

Boone said Peloton offers a “best-in-class connected fitness workout experience.”

“While the basis of our upgrade is a valuation call as the risk/reward appears favorable to us with shares trading at 3.0x our 2023E subscription revenue, we believe growth expectations have now been sufficiently reduced,” Boone said.

The analyst expects a wider rollout of the company’s rental offering and sees several areas for growth ahead.

PTON Price Action: Peloton shares are down 2.33% to $12.60 on Wednesday, according to Benzinga Pro.

Posted In: Andrew BooneBank of AmericaBernie McTernanconnected fitnessDana TelseyFitness StocksJMPJustin PostNeedhamTelseyAnalyst ColorEarningsNewsUpgradesPrice TargetReiterationAnalyst RatingsTrading Ideas