Peloton Interactive (PTON) stock went through the roof in 2020 on the back of robust demand for fitness-at-home products amid the COVID-19 pandemic.
Fast forward to 2021, shares of this exercise equipment and interactive fitness platform provider are down over 62% on a year-to-date basis, underperforming the Nasdaq composite index.
What Changed?
Peloton stock is under pressure as benefits from the pandemic-led demand began to fade amid easing restrictions.
Acknowledging tough operating conditions, Peloton said that 2022 would turn out to be a challenging year and lowered its near-term forecast. Peloton cited demand uncertainty, supply chain constraints, and commodity cost pressures taking a toll on its financial and operating performance.
It’s worth noting that Peloton now expects to report revenues in the range of $4.4 billion to $4.8 billion in FY22, compared to its previous forecast of $5.4 billion. Further, it projects connected fitness subscriptions to be 3.35 million to 3.45 million in FY22, down from 3.63 million.
Now What?
While challenges persist, Bernie McTernan of Needham maintained his Buy rating on the stock. McTernan’s bullish outlook assumes Peloton “to continue to add customers” in the post-pandemic world driven by “the launch of the value tread while keeping its churn low.”
However, McTernan lowered his price target to $105 from $130 and reduced his revenue and subscriber estimates.
Another key development worth noting is Peloton’s recent stock offering. It announced a $1.07 billion stock offering to strengthen its balance sheet and fuel future growth.
Notably, Peloton’s cash balance declined sequentially over the past two consecutive quarters. Its cash and cash equivalents stood at $924.2 million at the end of Q1 FY22 compared to $2.69 billion at the end of Q3 FY21.
Wall Street’s Take
Given the near-term headwinds, Wall Street maintains a cautiously optimistic outlook on PTON stock. On TipRanks, Peloton Interactive has received 14 Buys, 13 Holds, and two Sells for a Moderate Buy consensus rating.
However, PTON scores a 1 out of 10 from TipRanks’ Smart Score rating system, indicating it will likely underperform the market.
The average Peloton Interactive price target of $85.32 implies 63.5% 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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