Peloton (PTON) Shares Recover Some Losses in Pre Market After Sharing Preliminary FQ2 Results, Stifel Upgrades to Buy as 'Stock Has Over Corrected'

January 21, 2022 6:57 AM EST
Get Alerts PTON Hot Sheet
Price: $14.73 +2.15%

Rating Summary:
    20 Buy, 13 Hold, 2 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 4 | Down: 15 | New: 7
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Shares of Peloton (NASDAQ: PTON) are up 6.5% in pre-market Friday after the company released preliminary FQ2 results to soften the impact of the reported halt in the equipment production.

CNBC reported yesterday that the fitness company is halting production for 2 months as it is experiencing weak demand for its products. Inventory levels are high and Peloton is now focused on cutting costs, the report said.

CEO John Foley denied that they are halting production but rather said that the company is taking action to improve costs and right-size production.

Peloton stock closed 23.9% lower in response to the CNBC report.

After market close, Peloton released preliminary FQ2 results to report revenues of $1.14 billion, which compares to the $1.15 billion guidance (the midpoint). Peloton also reported Ending Connected Fitness Subscriptions of approximately 2.77 million, versus guidance of 2.8 million to 2.85 million.

Adjusted EBITDA is seen in a range of negative $270 million to $260 million, better than the previous guidance of negative $350 million to $325 million.

"As we discussed last quarter, we are taking significant corrective actions to improve our profitability outlook and optimize our costs across the company. This includes gross margin improvements, moving to a more variable cost structure, and identifying reductions in our operating expenses as we build a more focused Peloton moving forward. This work is still underway and we expect to have more details to share when we report earnings on February 8, 2022," Foley said.

In response to a sharp selloff seen yesterday, Stifel analyst Scott Devitt upgraded PTON to Buy from Hold with a price target of $40.00 per share, from the prior $56.00.

“We believe the stock has over corrected relative to underlying business conditions and note that yesterday’s closing price is below pre-pandemic levels (February 2020) despite the company having a significantly larger subscriber base (+289% larger now than December 2019) and subscriber additions that are meaningfully outpacing prior levels off of a much larger base,” Devitt said in a client note.

KeyBanc analyst Edward Yruma reiterated an Overweight rating and a $60.00 per share price target following yesterday’s developments.

“We recently cut our earnings and price target based on our checks pointing to continued weakness in connected fitness. Management noted ongoing moves to adopt a more variable cost structure and news reports point to still excessive inventory levels. We still see value in PTON’s highly engaged 2.77M, low churn members base, and believe that M&A could act as a floor for the stock,” Yruma wrote in his report.

Peloton stock price closed at $24.22 yesterday, below its IPO price of $29.00.

By Senad Karaahmetovic | [email protected]

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