Peloton (PTON) is Less Bearish Than Stock's Performance Suggests, Medium/Long Term Outlook Remains Bright - Analysts

January 14, 2022 11:03 AM EST
Get Alerts PTON Hot Sheet
Price: $24.76 -6.67%

Rating Summary:
    20 Buy, 13 Hold, 2 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 17 | Down: 15 | New: 37
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Shares of Peloton (NASDAQ: PTON) have fallen out of investors' favor over the past year - down around 80% from January 2021 highs - as the company has been battling slowing revenue growth due to COVID easing, product recalls, as well as some bad publicity.

Just last night, in another blow to the stock, Nasdaq announced it's dropping PTON from the Nasdaq-100 index.

Despite that, Truist Securities analyst Michael A. Swartz maintains a cautiously optimistic tone on the company, following a recent consumer survey. The analyst sees a path for Peloton's recovery, driven primarily by a notable shift in fitness habits and the company's strong branding.

He quotes: "We recently conducted a survey of ~1,400 adults (following prior surveys in Apr '21 and Oct '20) regarding their current fitness habits and future intentions. Despite widespread gym re-openings and vaccine availability, we are not seeing a commensurate reduction in at-home exercise interest/participation."

Following the survey, Truist is "starting to warm up to the name again" and lists several takeaways that should play in Peloton's favor:

1. Sustainable consumer interest in/engagement with at-home fitness, even as gyms have reopened and the economy recovers.

2. PTON remains the #1 brand in purchase consideration even after the Tread Plus mishap last year, with 25% of respondents planning to make a home fitness purchase within 12 months.

3. Heightened consumer interest in bike purchases, a segment where PTON leads, especially with its recent steep price drop.

4. All this suggests to us that the M/L term outlook for PTON remains bright. That said F2Q22 performance and F3Q22 guidance against very tough comps, plus some loss of credibility by management are likely to keep the stock in check short-term.

Truist reiterates a "Hold" rating on shares of PTON.

In a separate note, Loop Capital Markets analyst Daniel Adam believes that, despite the disappointing stock performance, "there are reasons to be bullish, or at least, reasons to be less bearish than PTON’s underperforming share price might otherwise suggest,"

He rests his bullish thesis on the following: " 1) recent app store rankings and social media trends have been encouraging; 2) potential “short squeeze” given PTON’s high short interest; and 3) valuation, in our view, implies a “free call option” on new category and product launches(e.g., strength, apparel)."

Loop reiterates a "Buy" rating on Peloton shares, but cuts the price target to $90 from $110.

PTON is trading over 3% lower as of midday.

Written by Vlad Schepkov |

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Vlad Schepkov