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On Tuesday, Citi analyst Ronald Josey adjusted the price target for Peloton Interactive (NASDAQ:PTON) shares, reducing it to $8.50 from the previous $10.00, while maintaining a Neutral rating on the stock. The adjustment follows the company’s first quarter results for the calendar year 2025. According to InvestingPro data, PTON currently trades at $7.57, having delivered an impressive 140% return over the past year despite its recent volatility.
Peloton has shown notable improvements, with churn rates declining to 1.2%, a 0.2% decrease quarter over quarter. The company has also seen a positive response to new product offerings, such as its Strength modalities, and has experienced expanding EBITDA and free cash flow (FCF) margins. These developments indicate a positive trajectory for the company, with InvestingPro reporting a healthy gross profit margin of 49.5% and positive free cash flow of $237.3 million in the last twelve months. InvestingPro subscribers can access 8 more key tips about PTON’s financial performance and outlook.
The new CEO’s strategic objectives aimed at returning the company to growth have also been a focal point. Josey highlighted the expansion of hardware gross margins to 14.3% in the first quarter, attributing this to structural improvements in warehousing, transportation, and inventory reserves.
The Lifetime Value to Customer Acquisition Cost (LTV/CAC) ratio for Peloton has returned to above 2x, which is within the target range of 2x to 3x. This, along with additional operational expenditure efficiencies, leads to expectations for continued EBITDA margin expansion.
Despite the positive indicators, the analyst expressed a cautious outlook, stating that while free cash flow is improving and there is anticipation for progress in Peloton’s growth initiatives, it is still early to make definitive predictions. The risk/reward balance at the current stock levels was cited as a reason for maintaining the Neutral rating with a High Risk designation.
In other recent news, Peloton Interactive has reported its third-quarter 2025 financial results, revealing a mixed performance. The company posted revenue of $624 million, slightly surpassing expectations, but its earnings per share (EPS) of -$0.12 fell short of the forecasted -$0.07. Peloton’s adjusted EBITDA showed significant improvement, marking the fifth consecutive quarter of positive results, with $89.4 million, exceeding both company guidance and consensus estimates. Macquarie has responded to these results by raising Peloton’s stock target to $10, citing strong growth and effective cost management. Conversely, Telsey Advisory Group has lowered its price target for Peloton shares to $8, maintaining a Market Perform rating due to concerns over subscriber trends and consumer spending on high-priced items. Peloton has raised its full-year financial outlook, adjusting its revenue forecast to a range of $2,455 million to $2,470 million and expects adjusted EBITDA between $330 million and $350 million. The company also anticipates approximately $250 million in free cash flow, up from a previous estimate of $200 million. Despite challenges, Peloton’s resilience is supported by its higher-income user base and the introduction of budget-friendly product options.
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