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Peloton Stock: Where it is Headed?
Stock Analysis & Ideas

Peloton Stock: Where it is Headed?

The fitness-at-home market has seen remarkable growth through the COVID-19 pandemic. Nowhere is that more reflected than through the strong performance of Peloton Interactive, Inc. (PTON), a leading interactive fitness platform and exercise equipment provider. 

Peloton’s quarterly revenues have consistently increased, both sequentially and year-over-year, since the fourth quarter of 2019. Its connected fitness subscriptions have also trended higher since then. (See Peloton Interactive stock charts on TipRanks)

Notably, the company posted 141% growth in its top-line during the third quarter of its Fiscal Year 2021. Furthermore, its average net monthly connected fitness churn rate remained low at 0.31%, while the retention rate remained high at 92%. 

Despite strong financials, Peloton is in the news for the wrong reasons. Reuters reported on August 13 that the company is facing a lawsuit for its unlawful taxation on memberships. Per the report, Peloton charged inapplicable sales tax on memberships in three states for which it has been sued.

This isn’t the first time that Peloton has faced a lawsuit. Earlier this year, Peloton was sued for a series of injuries related to its Tread+ treadmill. Following the injuries, Peloton issued a recall for this product, while the U.S. Consumer Product Safety Commission issued a warning to consumers about the dangers related to Tread+.

Peloton also faced a strong backlash from consumers for its Christmas bike ad in 2019.

Nevertheless, the majority of Wall Street analysts maintain a bullish view on Peloton stock. Jason Helfstein of Oppenheimer, one of the Peloton bulls, wrote in a research note that “As the company continues to quickly grow its subscriber base, we forecast subscription contribution margin will exceed 70%, with churn remaining minimal.”

Helfstein further added that Peloton’s “expansion into corporate wellness increases TAM (total addressable market).” 

Helfstein reiterated a Buy rating on PTON with a price target of $150 (34% upside potential). 

On TipRanks, Peloton is a Moderate Buy based on eight Buys, two Holds, and one Sell. The average Peloton Interactive price target of $128.40 implies approximately 14.9% upside potential to current levels.

However, TipRanks’ Stock Investors tool shows that investors currently have a Very Negative stance on Peloton stock, with 1.6% of investors who hold portfolios on TipRanks having decreased their exposure in the last seven days.

Disclosure: Amit Singh held no position in any of the stocks mentioned in this article at the time of publication.

Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.

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