: Value Investing Forum - Singapore, Hong Kong, U.S.

Full Version: Peloton (PTON)
You're currently viewing a stripped down version of our content. View the full version with proper formatting.
Peloton stock is 30% undervalued: analyst

Brian Sozzi·Anchor, Editor-at-Large
Thu, 7 October 2021, 1:24 am

Despite elevated concerns about its near-term profitability amid treadmill recall costs and higher supply chain expenses, the Street continues to defend Peloton's stock.

The latest hot take came Wednesday from Stifel analyst Scott Devitt.

"We estimate current penetration within existing markets remains low, at just 3.4% in the U.S. and significantly lower in international markets. We continue to see multiple drivers for near-term growth as Peloton invests behind the recent Bike price reduction and the reintroduced Tread. Longer term, we see ongoing international expansion and new hardware opportunities as drivers of sustainable growth," Devitt said in a research note to clients.

The analyst left his financial projections on Peloton (PTON) mostly unchanged. But, he did slash his price target to $120 from $140.

Added Devitt, "Peloton is taking share across the fitness equipment category, in our view, and remains well positioned to continue doing so and expand the market as it drives innovation in the industry and business model. We expect Peloton's annual growth rate over the next five years to reward current valuation multiples due to continued core product momentum, new product offerings, and geographic expansion."

Out of the 31 sell-side analysts that cover Peloton's stock, 74% rate it a Buy, according to Bloomberg data. The average analyst price target is $128.

Suffice it to say, market goers have staked out a rather different take on Peloton's stock than the analysts who cover the company.

Shares of Peloton have plunged 45% to $85 so far on the year. The stock is down 49% since hitting a 52-week high on Sept. 13.

More details in
Before Covid19, I had thought of Peloton just been a wifi-enabled exercise bike + an interactive screen. It would probably only cater to a niche audience but of course Covid-19 proved it wrong for the next 2 years.

Peloton’s problems aren’t just Peloton’s

But as Peloton searches for a buyer, plenty of other companies are building streaming platforms for fitness content that allow people to use any equipment they want — and for a lot less money. These services include Apple’s Fitness+, on-demand home workouts from ClassPass, and millions of fitness videos on YouTube. These streaming options tend to make money through advertisements or low-cost monthly subscriptions without pushing people to buy specialized equipment.

Whether other companies will go the way of Peloton remains to be seen. Of course, this would hardly be the first time an at-home fitness fad has come and gone. Every generation of tech seems to come with its own spin on the home fitness revolution, from VHS aerobics to the exercise equipment sold on QVC. This time around, Peloton thought streaming and touchscreens would be the breakthrough to keep people hooked. Unfortunately for Peloton, the company may have just built another expensive clothing rack.