Is Peloton Stock a Buy? (May, 2024)

Following news of a restructuring, Roth MKM analyst George Kelly has chopped his price target on Peloton (Peloton Stock Quote, Chart, News, Analysts, Financials NASDAQ:PTON).

On May 2, PTON announced that CEO Barry McCarthy would step down and it would begin the search for a CEO. The company also announced a cost reduction effort that it said would reduce its run-rate by $200-million. The moves followed third quarter results on April 18 that failed to sway the street.

The analyst says there is not much to recommend in PTON right now.

“We feel much the same after PTON’s fiscal 3Q24 report,” he wrote. “In our view, it’ll be hard for the stock to work materially higher without a recovery in industry demand. And demand trends remain weak and unpredictable. With that said, management is wise to lessen the cost structure and focus on FCF until conditions “normalize.” Whenever they do, we believe PTON will take share.”

In a research update to clients May 2, Kelly maintained his “Buy” rating but cut his price target on PTON from $7.00 to $5.00.

The analyst thinks PTON will post EBITDA of negative $11.3-million on revenue of $2.68-billion in fiscal 2024. He expects those numbers will improve to EBITDA of positive $137.8-million on a topline of $2.68-billion in fiscal 2025.

Our $5 price target (from $7) is based on 1.0x FY25E revenue,” Kelly explained. “Impediments to our price target include: Unsuccessful new product launches: If new products fail to gain traction, it would impact growth in revenue
and profitability. Competition: If competitors release new equipment products or innovative media programming, it could limit Peloton’s ability to grow. Economy: If the economy weakens it could negatively impact consumers and lead to churn.”