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On Monday, Telsey Advisory Group adjusted its outlook on Peloton Interactive shares (NASDAQ:PTON), currently trading at $6.82 with a market capitalization of $2.66 billion, reducing the price target to $9 from the previous $11, while retaining a Market Perform rating. The adjustment reflects a more conservative valuation amid market volatility and economic uncertainty. According to InvestingPro data, the stock has shown significant price volatility, with a beta of 2.22.
The firm anticipates Peloton’s third-quarter fiscal year 2025 results, scheduled for May 8, to demonstrate ongoing profitability and disciplined management, especially under the guidance of the new CEO Peter Stern (AS:PBHP). While InvestingPro analysis indicates the company remains unprofitable with a -$290.6 million net income over the last twelve months, Stern’s leadership is credited with implementing stringent cost controls, achieving better unit economics for hardware, and optimizing marketing expenditures. The company maintains healthy liquidity with a current ratio of 2.06. Telsey’s analysts also expect to see further evidence of strategic advancements as Peloton strives to stabilize its subscriber base and reignite growth.
Key strategic initiatives that analysts will be monitoring include product innovation, such as the introduction of Strength+ and Pace Targets, efforts to expand Peloton’s customer base through partnerships with Costco (NASDAQ:COST) and gyms, as well as international expansion. Additionally, initiatives aimed at subscriber retention, like diversifying content and introducing Teams, will be under scrutiny.
Despite these positive developments, Peloton is anticipated to face significant challenges in hardware sales for the quarter due to seasonal downturns and cautious consumer spending. The company has initiated several promotions for its equipment during the quarter and into the fourth quarter of fiscal year 2025 to counteract these pressures.
Another area of focus for Telsey is the impact of new tariffs. Peloton’s connected fitness equipment, which is sourced from Taiwan, is subject to a new 10% tariff. However, the firm expects the impact on Peloton to be moderate or minimal, as the company has minimal exposure to China.
Telsey’s revised price target of $9 is based on an enterprise value to sales (EV/Sales) multiple of approximately 1.5 times, a decrease from the previous multiple of 1.7 times, applied to their fiscal year 2026 sales estimate of $2.50 billion. This new valuation multiple accounts for the current market volatility and heightened economic uncertainty. For deeper insights into Peloton’s valuation and access to comprehensive financial analysis, including 8 additional ProTips and detailed Fair Value estimates, investors can explore InvestingPro’s exclusive research report, part of its coverage of over 1,400 US stocks.
In other recent news, Peloton Interactive has received preliminary court approval for a proposed settlement of consolidated derivative actions, marking a significant step in resolving ongoing litigation. The settlement, which involves cases in both New York and Delaware, aims to address claims related to the company’s governance and internal practices. In parallel developments, Truist Securities has upgraded Peloton’s stock rating from Hold to Buy, setting a price target of $11.00, citing improved fundamentals and a focus on revenue growth. Meanwhile, BofA Securities has adjusted its price target for Peloton shares to $9.50, maintaining a Buy rating and projecting revenue and EBITDA figures that surpass Wall Street’s consensus for the upcoming fiscal quarter.
Additionally, Citizens JMP has maintained a Market Perform rating for Peloton, with analyst Andrew Boone discussing potential strategies for increasing monetization, including a possible subscription price increase. In leadership news, Peloton has appointed Charles Kirol as the new Chief Operating Officer and Dion Camp Sanders as Chief Commercial Officer, moves aimed at enhancing operational efficiency and market presence. These appointments are part of Peloton’s broader strategy to deliver high-quality fitness experiences and improve its business model. The company is also actively seeking a Chief Information Officer to oversee its IT strategy. These recent developments reflect ongoing efforts by Peloton to stabilize and grow its business amidst various challenges.
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