Deutsche Bank downgraded shares of Peloton (NASDAQ:PTON) to Hold from Buy, lowering the price target for the stock to $4 from $13 per share in a note Tuesday.
Analysts at the firm explained that they are lowering the rating for the stock as there is a lack of clarity in the growth outlook.
"While we remain bullish on Peloton having a large TAM ahead of it that can support accelerative growth, particularly given the incremental growth drivers from the App, Commercial business, new modalities/hardware, and growing partnerships, the confidence in underwriting the success of these growth drivers in the medium term is challenging," said the investment bank.
"Thus, we believe that valuation on a growth-adjusted EV/GP multiple basis should be closer to Peloton's peers," they added.
The firm noted that the connected fitness equipment company's recent earnings results were mixed with revenue, gross profit, and EBITDA ahead of expectations and subscriber metrics coming in light.
The analysts believe that while PTON's growth initiatives have promise in the long-term, current churn challenges/macro pressures are "creating an environment where these growth drivers are yet to move the needle on the P&L meaningfully."
After a more than 3% fall on Monday, PTON shares are down a further 5.2% in early Tuesday trading.