Calling 2021 a challenging year for Peloton (PTON) shareholders would be an understatement. It’s worth noting that Peloton stock fell nearly 75% this year, wiping out a significant portion of its shareholders’ wealth.
Demand uncertainty amid economic reopening weighed heavily on Peloton stock. To give some background, Peloton gained on the back of increased demand for at-home fitness amid the COVID-19 pandemic.
However, the easing of lockdown measures and revival in demand for in-person fitness in 2021 played spoilsport, leading management to lower its full-year guidance for sales and subscriptions.
Peloton now expects its connected fitness subscription to be between 3.35 million to 3.45 million at the end of FY22, lower than its previous forecast of 3.63 million subscriptions. Further, it reduced its FY22 revenue guidance to $4.4 billion to $4.8 billion from $5.4 billion.
During the Q1 conference call, Peloton CEO John Foley stated that the company witnessed a “greater-than-anticipated taper” in its website traffic in the last two months. Meanwhile, it has seen a “slower-than-expected pickup in retail showroom traffic.”
Besides demand uncertainty, management listed supply-chain challenges and commodity cost pressures as headwinds.
What’s Next?
Given the lower traffic and guidance cut, Peloton stock has negative indicators from investors and hedge funds.
TipRanks’ Hedge Fund Trading Activity tool shows hedge funds lowered their holdings in Peloton stock by 1.7 million shares over the past three months. Meanwhile, TipRanks’ Stock Investors tool shows that 0.8% of investors who hold portfolios on TipRanks have reduced their exposure to Peloton stock in the past month.
Highlighting demand headwinds, Kaumil Gajrawala of Credit Suisse downgraded Peloton to a Hold from a Buy. He cut the price target to $50 from $112. Gajrawala expects growth to remain a challenge in FY22.
Along with Gajrawala, Scott Devitt of Stifel Nicolaus remains sidelined on Peloton stock. He sees “fewer near-term catalysts,” however, he is upbeat about Peloton’s long-term prospects based on new product launches and market expansion.
Wall Street’s Take
On TipRanks, Peloton stock has received 11 Buy, 13 Hold, and 2 Sell recommendations for a Moderate Buy consensus rating. Meanwhile, the average Peloton stock price target of $75 implies 94.8% upside potential to current levels.
Disclosure: On the date of publication, Amit Singh had no position in any of the companies discussed in this article.
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