Peloton Interactive Inc (PTON) stock rose significantly on Friday after the company announced positive quarterly earnings. The company’s sales surpassed expectations, marking the first time in years that they’ve shown growth. However, the company also reported a decline in paid subscribers and an increase in churn, both of which were higher than anticipated. Despite these factors, analysts remain hopeful about the company’s future.
Paul Golding, an analyst, maintained a Neutral rating for Peloton, but increased the price target from $2.53 to $4.90. He acknowledged the company’s strong performance across major metrics, including the sales growth, but also highlighted the concerns related to the subscriber decline and churn. Golding expressed optimism about Peloton’s gross margins, which the company expects to expand through strategies like hardware margin expansion and a shift toward subscriptions. However, he cautioned about the uncertainties surrounding revenue outlook and the ongoing CEO search, which could impact the company’s performance.
Doug Anmuth, another analyst, also maintained a Neutral rating but lowered the price target from $7 to $6. While he acknowledged Peloton’s positive Adjusted EBITDA and Free Cash Flow for the second consecutive quarter and its cost-saving restructuring program, Anmuth noted the continued decline in the connected fitness industry due to macroeconomic pressures. He expressed concern about the company’s revenue guidance, which he deemed softer than expected, considering factors like hardware sales decline, macro headwinds, reduced marketing spending, and increased churn.
Curtis Nagle, with an Underperform rating and a price target of $3.25, emphasized the company’s higher-than-expected churn rate, exceeding Street expectations of 1.7%. He acknowledged Peloton’s strong revenue and EBITDA performance, driven by increased gross margin and reduced marketing expenses, but expressed concern about the projected negative free cash flow for the first fiscal quarter. However, he also noted the company’s guidance of at least $75 million in free cash flow for the entire fiscal year 2025.
Bernie McTernan reaffirmed a Hold rating on Peloton, stating that the company’s focus has shifted toward optimizing margins instead of growth. He considered this shift positive for the company’s liquidity concerns, a significant factor for investors. However, he acknowledged the possibility of two more years of revenue decline, potentially impacting the company’s long-term growth prospects.
Peloton Interactive’s stock price closed at $4.76, representing a 4.73% increase at the time of publication. While the company’s recent earnings report provides some optimism, its performance remains closely watched by investors as it navigates the evolving connected fitness market.
