Peloton (NASDAQ:PTON) stock fell 8.7% yesterday to close at $12.90, roughly 92% lower compared to the record high set in December 2020.
The latest drop came after the company offered a light forecast and said it raised $750 million in debt from Goldman Sachs (NYSE:GS) and JPMorgan (NYSE:JPM).
Stifel analyst Scott W. Devitt downgraded shares to Hold from Buy with a $14.00 per share price target today.
“While we acknowledge that it is still early in the company's transition, visibility into the normalized growth rate of the business has yet to emerge. Guidance for 2Q calls for just ~18K net sequential Connected Fitness Subscriber additions, despite the company having lowered prices on its core hardware products in April. The price reductions implemented early in F4Q will contribute to reductions in hardware gross margins, leading to an adj. EBITDA outlook well below our expectations and consensus. We expect it will take several quarters to determine a more normalized pace of connected fitness subscriber growth, and we are materially lowering our estimates as we take a wait-and-see approach to initiatives aimed at reinvigorating growth and reducing costs,” Devitt said in a client note.
On the other hand, JMP analyst Andrew Boone finds Peloton’s valuation “attractive” after a significant move lower. The analyst has a $25.00 per share price target on Peloton.
“We believe growth expectations have now been sufficiently reduced and we note our 2023 revenue estimate is roughly unchanged. Given our view that Peloton’s Connected Fitness workout experience is best in class and that Peloton can continue to take share from gyms given its fantastic user experience (members worked out 18.8x per month last quarter), convenience (at home and on demand), and lower cost (relative to boutique fitness classes), while the One Peloton Club and pricing optimization are unlocking demand and leading to better monetization, we are looking through current revenue visibility issues and upgrading shares.”
Similarly, JPMorgan analyst Doug Anmuth “likes” the risk-reward at current levels.
“The near-term environment remains challenging & significant cost savings will take time. PTON is very much a show-me story, but we like the risk/reward at current levels, particularly as the market assigns zero to negative value to CF Products, & only 1.3x ‘23E Revenue & 3.1x '23E Gross Profit to the company overall,” Anmuth told clients.
By Senad Karaahmetovic