A Peloton exercise bike
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Peloton Interactive stock has dropped more than 40% year to date. Morgan Stanley thinks investors are wise to stick to the sidelines.
Analyst Lauren Schenk initiated coverage of Peloton (ticker: PTON) with an Equal Weight rating on Monday, writing that while she does “lean bullish, with 50% upside to our $32 price target,” there’s a lack of visibility near term on the shares. That, combined with a “wide range of potential outcomes” for her bullish and bearish scenarios, leads her to be neutral on the stock.
Perhaps one of the key takeaways from her analysis though is that Peloton needs to be more than just an equipment company. Even at current levels, after the shares have traded down meaningfully, the market still seems to be putting a multiple of 4.5 on fiscal 2023 connected fitness subscription revenue.
In other words, the answer to the question “Can you buy Peloton at these levels on just the Bike business alone?” is no.
Peloton is of course working to keep subscriptions up, and recently announced the One Peloton Club, with new pricing structures. Schenk writes that the offer is compelling from a consumer perspective, “given the ease and low cost of trial,” but is also concerned it could lead to higher subscriber churn over time.
She writes that she would get more bullish if Peloton can pull off greater bike sales and subscriptions, but would grow more cautious if churn does increase over time.
Schenk isn’t the only analyst on the sidelines. While nearly three-quarters of analyst tracked by FactSet were bullish on Peloton in October, that figure has dropped to less than half.
Peloton stock is edging 0.2% higher at recent check, to $21.20.
Write to Teresa Rivas at [email protected]
