Investors have recently expressed some concern about whether the popular “home” companies will be able to sustain their momentum, but analysts seem optimistic about Peloton Interactive Inc’s outlook going forward.
Shares of Peloton PTON,
It rose about 3% in Friday morning deals after being posted by a connected exercise equipment manufacturer. Record quarterly earnings First quarter revenue, revealing that there is still a large backlog due to surge in demand during the COVID-19 crisis.
“We’ve had some concerns over the guide over the course of a year in the face of numerous COVID-related unknowns that are not known regarding COVID, but management’s expectations of more than 2 million connected fitness subscribers to end FY21 are far more than the sales side. It’s almost 20% higher,” Evercore wrote. ISI analyst Lee Horowitz mentioned the company’s subscription service to video-based movements.
Horowitz described Peloton as “the most obvious long-term beneficiary of COVID on the consumer internet,” arguing that “as the company’s guidelines show, the benefits of this unfortunate crisis will prove incredibly sticky.”
He maintained a good rating for the stock price and nearly doubled his target price from $62 to $120.
Rosenblatt Securities analyst Bernie McTernan also explained subscription momentum. “The striking thing about the revenue is that the Connected Fitness Subscriber Guide was better than I expected, and it almost doubled the number of subscribers and didn’t have a big impact on value. [treadmill] This is what we expect to be an important driver for FY’22E,” he wrote. “The focus on inexpensiveness will accelerate the blending transition of revenue and profit to subscriptions, the company’s core value creator.”
McTernan has a buy rating on Peloton’s stock and raised his target price from $105 to $130.
Stifel’s analyst Scott Devitt claimed that Peloton had a big runway in the future, and the company was sold to Netflix Inc. I compared it to the NFLX.
And Amazon.com Inc. AMZN,
“The gyms of the future could mostly be reserved for those in strength, connectivity, cramped dwellings, as a growing part of the population chooses to work out at home now, as technology allows,” he wrote.
Devitt says that Peloton has a “great lead” in in-home aerobic exercise, and in the end, [how] Amazon started with books and now sells everything.” “This phenomenon will spread all over the world, and like Netflix, there are significant cost advantages to building content globally.” He wrote it by repeating the purchase rating and raising the target price from $72 to $120.
Barclays analyst Deepak Mathivanan wrote that Peloton “has already resumed tread sales in many markets as the COVID restrictions eased, which will gradually contribute to sales along with strong bike sales over the next few quarters.”
Mathivanan warned that the company’s gross margin for connected fitness products is expected to shrink, and that the latest commentary still has a few negatives, including that an upcoming low-end treadmill product may put pressure on gross margins as well.
He continued to assess the stock price as being overweight, raising the target price from $74 to $110.
According to FactSet, at least 19 analysts have raised their target price for Peloton’s stock since the report. Of the 26 analysts tracked by FactSet, which deals with Peloton’s stocks, 23 have a buy rating, two hold a hold, and one sell rating. The average target price listed is $110.08.
According to financial data and analytics firm S3 Partners, Peloton had the largest short selling of stocks in the domestic leisure products segment at $492 million as of September 10th. Short selling fell by $575 million in market cap to date this year, followed by financing.
Peloton shares have risen more than 200% by 2020 with the S&P 500 SPX.
It rose 3.8%.
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