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On Tuesday, BofA Securities analyst Curtis Nagle reduced the price target for Peloton Interactive (NASDAQ:PTON) shares to $9.50 from the previous $11.50 while still recommending a Buy rating for the company. Currently trading at $5.70, InvestingPro analysis suggests the stock is slightly undervalued, despite showing high price volatility. The stock has experienced a significant 73.25% gain over the past year, though it remains down 34.48% year-to-date. Nagle’s forecast anticipates Peloton’s upcoming financial report on May 1 before the market opens, followed by a conference call at 8:30 am ET. The analyst projects that for the third fiscal quarter of 2025, Peloton will see connected subscribers, revenue, and EBITDA at 2.87 million, $628 million, and $84.1 million respectively. These figures surpass Wall Street’s consensus by 0.2%, 1.1%, and 6.2% and outperform the midpoint of the company’s guidance by 0.3%, 2.2%, and 8.6%.
The guidance for the third fiscal quarter suggests a slowdown in revenue, attributed primarily to a post-holiday decrease in hardware sales, and a deceleration in the growth of connected subscribers. However, Nagle notes that current data points to stable quarter-over-quarter trends. InvestingPro data reveals the company maintains a healthy current ratio of 2.06, indicating strong short-term liquidity. Get access to 12 more exclusive InvestingPro Tips and comprehensive financial analysis through the Pro Research Report, available for over 1,400 US stocks. Despite potential challenges posed by an uncertain economic environment affecting new subscriber growth, the analyst sees flexibility in the implied fourth-quarter guidance, which suggests a modest deceleration compared to an easier comparable period from the previous year.
BofA Securities remains optimistic about Peloton’s margin opportunities, including continued operational expenditure reductions and the potential for a subscription price increase, which Nagle believes could be implemented as early as next winter. The company currently maintains a gross profit margin of 47.45%, though InvestingPro data shows it’s still working toward profitability with negative EBITDA in the last twelve months. Three analysts have recently revised their earnings estimates upward for the upcoming period, suggesting growing confidence in the company’s financial trajectory. The firm’s positive outlook is also based on the belief that Peloton has the capacity to generate significantly more than $400 million in EBITDA, well above the fiscal year 2025 guidance range of $325-350 million initially set at $200-250 million.
In support of the revised price target, Nagle cites a lower market valuation, applying an 11 times calendar year 2026 enterprise value to EBITDA multiple, down from the previous 13 times. Despite the reduction in price target, BofA Securities maintains its estimates for Peloton’s financial performance.
In other recent news, Peloton Interactive has made significant leadership changes, appointing Charles Kirol as the new Chief Operating Officer and Dion Camp Sanders as the Chief Commercial Officer. These appointments are aimed at enhancing operational efficiency and expanding market presence. In terms of financial performance, Canaccord Genuity upgraded Peloton’s stock from Hold to Buy, setting a price target of $10.00. This upgrade reflects optimism about Peloton’s strategic efforts to improve its cost structure and unit economics, with expectations of a significant boost in adjusted EBITDA by FY25.
UBS analysts maintained a Neutral rating on Peloton with a price target of $7.50, focusing on the potential impact of new tariffs on the company’s cost of goods sold. The analysts noted that the reciprocal tariffs on China are expected to have an immaterial effect on Peloton’s costs. Meanwhile, JMP Securities also maintained a Market Perform rating, acknowledging Peloton’s exploration of new revenue strategies but holding off on a more positive outlook pending evidence of subscriber growth.
Citizens JMP, with analyst Andrew Boone, also kept a Market Perform rating, discussing potential strategies for monetization, including a possible subscription price increase. Boone highlighted the potential for Peloton to expand into new sectors like nutrition but emphasized the need for more clarity on subscriber growth acceleration before upgrading the stock. These developments come as Peloton seeks to revitalize its business model and enhance its financial performance.
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