Peloton is down 35%: buy the dip or sell the rip?

By: Wajeeh Khan
Wajeeh Khan
Wajeeh is an active follower of world affairs, technology, an avid reader, and loves to play table tennis in… read more.
on Nov 5, 2021
  • Paul Golding reiterates his "outperform" rating on Peloton with a PT of $85.
  • The analyst says new regions, products, and tech can drive growth for Peloton.
  • Shares of Peloton Interactive Inc are down close to 35% on Friday.

Peloton Interactive Inc (NASDAQ: PTON) is down about 35% in the stock market on Friday after a disappointing quarterly report and a rather bleak outlook for the future. But there’s one analyst who’s convinced the stock will recover completely.

Macquarie Capital’s Paul Golding sees an over 50% upside

In a research note on Friday, Macquarie Capital’s Paul Golding reiterated his “outperform” rating on Peloton with a price target of $85 a share that represents an over 50% upside from here.

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The strongly bullish call is particularly surprising since it was the second quarter in a row for Peloton to take a hit on fading demand for its exercise equipment, and the management itself doesn’t expect things to pick up anytime soon.

Golding agrees that the revised guidance doesn’t invoke confidence but says the stock price is still not justified. He wrote:

We’ll be watching demand, churn, costs, and liquidity closely, but the share price isn’t reflective of what Peloton has become – a highly-scaled global wellness and media platform. Its growth trajectory, albeit flatter than Street expectations, can still benefit from new regions, new products, and new technologies.

A new treadmill didn’t do much for Peloton in Q1

Peloton was expected to benefit from a new treadmill launched recently and lowered prices for its core exercise bike.

But lower-than-expected results in a quarter when expectations were already bottomed, as per Wedbush Securities’ James Hardiman, is a proof that the strategy didn’t deliver what the company had expected.

Peloton slashed its full-year revenue guidance last night from $5.4 billion to $4.8 billion at the top end. It expects $1.20 billion in revenue this quarter versus the FactSet consensus of $1.49 billion.

Also on Friday, BMO Capital Markets’ Simeon Siegel rated Peloton at “underperform” with a price target of $45 that translates to another 20% decline from here.

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