By Senad Karaahmetovic
A UBS analyst cut the price target on Peloton Interactive (NASDAQ:PTON) to $8 per share (from $13), which is a new Street-low.
The price target change is driven by weaker revenue and “continued subdued profitability outlook.” The analyst highlights the lower revenue run rate and limited cost-cutting as two key factors why he remains Sell-rated.
“We are increasingly unsure what's upside to PTON's previously announced cost cutting strategy amid investor expectations that PTON should substantially outperform the $800M of previously issued cost cutting target,” she told clients in a note.
Before moving to the sidelines, the UBS analyst would want to see more clarity on these three issues:
- Higher CAC upfront when PTON needs to reduce marketing spend significantly;
- Still a fairly capital-intensive business; and
- Does everyone need a bike as much as they need a phone?
In the case that Peloton is able to “drive faster than expected revenue growth and/or turning Adj. EBITDA/FCF positive,” the analyst sees the potential for a move to $18 per share based on her upside-case scenario.
Peloton shares closed at $10.28 yesterday.