Peloton Interactive (PTON) Shares Currently Discount a 42% CAGR Through 2024, UBS is 'Less Constructive'
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UBS analyst Eric Sheridan reiterated a Sell rating and $74.00 price target on Peloton Interactive (NASDAQ: PTON) on the belief that the Street expects Peloton to maintain a +42% CAGR in Connected Fitness subs in 2024E, implying close to 8.4% penetration of total addressable market.
The analyst believes a more realistic assumption is 7.7% household penetration in 2024 and sees high expectations baked into the current share price. He stated "The market is assuming roughly +38% CAGR for PTON through FY'23 vs. UBS at closer to +29-30%. We believe the market is ascribing higher growth to PTON's commercial opportunity and expansion into B2B channels (college campuses, hotels etc.), given acquisition of Precor and recent roll-out of corporate wellness offering, more than offsetting potentially slower roll-out of the new Tread product in the U.S. separately, consensus expects +31% of total subscriber CAGR over the same period to drive +41% increase in subs revenue. We believe this is further evidence that the market is assigning higher ASP growth to potentially B2B/commercial opportunities, such that 31% subscriber CAGR is expected to drive more than 10ppts higher subs revenue CAGR over the next 5 years." He went on to comment "We remain less constructive on the stock given: 1) slower sales CAGR expectation longer-term vs. what the market is implying; 2) Q4 outlook was lower even after adjusting back recall impact, which adds to near-term uncertainty on normalized demand curve post Covid."
Shares of Peloton Interactive closed at $113.36 yesterday.
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