If you’re on the lookout for comeback kids in 2023, you already have plenty to pick from. After 2022’s carnage – with previous high-flying tech stocks getting especially battered – fortunes appear to be turning for a host of names. Peloton (NASDAQ:PTON), for example.
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Following a two-year post-pandemic slump with the shares getting absolutely decimated on the back of myriad issues (falling demand, recalled bikes due to safety concerns, personnel changes in the C-Suite), the shares have already more than doubled year-to-date.
26% of those gains came in Wednesday’s session with investors applauding the home exercise specialist’s results for the second quarter of fiscal 2023 (December quarter).
Although revenue fell by 30.5% year-over-year to $792.7 million, the figure easily beat the $710 million anticipated on the Street. For the third consecutive quarter, subscription revenue bettered hardware sales with the former generating $411.3 million against the latter’s $381.4 million. This had a positive impact on gross margins, which grew from 24.8% in the same period a year ago to 29.7%. As for the FQ3 outlook, the company is calling for revenue between $690 million and $715 million, some distance above consensus at $694.51 million.
With a top line guide that bettered Street expectations for the first time since the post-Covid sales pullback began and expecting to become break-even free cash flow by the June quarter, Deutsche Bank’s Chris Woronka says the F2Q23 report and outlook is “an indication that the deep turnaround is showing signs of continued progress.”
“While we fully expect that PTON’s integrated sales and marketing strategies will continue to evolve in response to customer feedback and unit economics, we think the company has now streamlined its expense base to the point where it can re-approach positive EBITDA even in an environment where revenue is still declining on a y/y basis,” Woronka went on to say. “Importantly, liquidity appears to be fading further into the rearview mirror for investors, and the focus has migrated to PTON’s ability to resume growth on a profitable basis (which we anticipate is doable on a full year basis in fiscal 2024).”
Accordingly, Woronka rates PTON shares a Buy along with a $20 price target, suggesting the shares have room for further gains of ~18%. (To watch Woronka’s track record, click here)
Not all share Woronka’s upbeat assessment; the stock ekes out a Moderate Buy consensus rating on a mix of 9 Buys, 13 Holds and 2 Sells. The analysts see shares giving back to market ~17% of the recent haul, considering the average target stands at $14.16 (See Peloton stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
