BofA downgraded shares of Peloton (NASDAQ:PTON) to Underperform from Neutral, lowering the price target to $4.14 from $6.50 in a note Thursday.
BofA analysts noted the connected fitness equipment company's declining engagement and aging subs, suggesting they "could lock Peloton's flywheel in place."
"In our view, shares do not reflect risk to revenue from increased churn due to declining platform engagement and subscriber base that is increasingly at risk as COVID cohorts reach the average subscriber lifetime," they wrote.
While the firm acknowledges that Peloton is "the leading global digital fitness platform" with 3 million members and annual retention rates on par with top-tier subscription companies, the analysts said they believe cracks are forming in Peloton's ability to grow subscribers.
The investment bank's analysis of three years of class data for top peloton cycling instructors shows a sharp drop in the number of classes taken per subscriber.
"We see increased churn risk in 2024 from this dynamic as the number of members reaching the average subscriber lifetime increases 2.6x from 2023 using a 60-month average lifetime," the analysts said.