Peloton Interactive stock is making a comeback, with the stock up 30% this year. But many investors who bought into the affiliated fitness company during the pandemic are still making big losses; Shares are down 93% from their all-time high at the end of 2020 and are currently trading around $10.40. The connected bike and treadmill company, which became a household name during the Covid pandemic as a solution for closed gyms, overestimated demand for its products and services during the pandemic. As global lockdowns and restrictions were lifted, the company faced falling sales, a shift in consumer preferences and a health and safety scandal that led to the resignation of former CEO John Foley. Barry McCarthy, a former executive at Spotify and Netflix, has been hired as the new boss with an aggressive turnaround plan amid a new era of fiscal discipline. Where is Peloton going next? Wall Street analysts are generally bullish on the stock. Consensus 30 analyst price target ($17) points to a 63% upside move over the next 12 months. Analysts at JPMorgan said McCarthy’s efforts to align Peloton’s business with a subscription and fitness-as-a-service model appear to be paying off. Early signs of rising revenue and lower losses are also “encouraging,” the investment bank said. According to FactSet, Peloton improved its free cash flow from minus $747 million in March 2022 to minus $94 million at the end of its most recent fiscal quarter. “We believe Peloton is well positioned to revolutionize the fitness industry through its home-connected fitness subscription platform, with significant opportunity for growth as PTON members represent only approximately 4% of global gym memberships,” wrote analysts Doug Anmuth and Bryan Smilek in a note to clients, raising their price target to $19 per share. Analysts at PTON 1Y line JMP Securities said Peloton sold about 600 bikes on Amazon in February — just 1% of total orders in the “Top 50 Best Selling Exercise Bikes” category. However, due to their higher cost, orders accounted for 19% of total sales in the category. Analysts concluded that this means that “Peloton’s position in the post-Covid category is strengthened as we continue to view Peloton as a best-in-class customer experience and hardware product.” Analysts at Barclays Equity Research, which also have a $19 target price on the stock, noted that margins had improved as subscription sales generated more revenue than hardware. McCarthy told CNBC in February he doesn’t care that the company is losing money from device sales and is instead focusing on revenue from its mobile app. Barclays analysts also noted that the customer churn rate — the percentage of customers who cancel their subscriptions — remained low at 1.1%. The Bear Case Not everyone has resigned to Peloton’s transformation story, however. UBS analysts questioned the company’s ability to maintain positive free cash flow while continuing to grow. They also noted that digital-only subscriptions, which are separate from affiliated fitness subscribers, declined marginally last quarter. “The key question, in our view, is not whether Peloton can achieve break-even cash flow, but whether Peloton can achieve and maintain cash flow positive as the company returns to growth,” analysts said of the stock, writing on Feb a notice to customers. UBS’s $8 price target represents a more than 20% drop from the current share price. Similarly, analysts at Morgan Stanley said big discounts and promotions boosted new subscribers, especially during the holiday season late last year. “Can the current growth in connected fitness units continue at this rate?” asked the analysts, who have a $4.50 target price and a hold rating on the stock, in a note to clients. “We are skeptical without a similar level of promotional activity.” – CNBC’s Michael Bloom and Gabrielle Fonrouge contributed coverage.
Source : www.cnbc.com