Peloton Interactive has a new bull, and he has a Street-high price target.
Gordon Haskett analyst John Parke initiated coverage of Peloton (ticker: PTON) with a Buy rating and $190 price target, implying 19.6% upside from recent levels. It’s also the highest such target listed by FactSet, where targets average out at $149.48.
“Broadly speaking, Peloton is spearheading a generational shift in how fitness is consumed and encouraged by providing a solution that reduces the resistance to exercise,” Parke wrote in a Friday note.
Parke noted that the Covid-19 pandemic has driven demand for the company’s $1,895 connected bikes—which pair with a $39-a-month subscription to access most of its features. Over the long-term, he argued, Peloton could help make consumers appreciate health more, resulting in an exercise boom. Deurbanization and the rise of working from home also play into that trend.
Peloton’s “build out of a broader fitness ecosystem beyond its current offering will only serve to heighten the value proposition of its $39/month membership, making it an undeniable value on an absolute basis, relative to peers, and even complimentary for some consumers who decide to return to brick and mortar gyms,” Parke added.
Peloton stock has soared 467.2% in the past 12 months—a staggering jump, especially for a stock that had its critics in the months leading up to the pandemic. Parke noted that such a large leap, as well as valuation ambiguity and general sentiment around Covid-19, could disconnect share performance from strong fundamentals. He also pointed to shipping delays and lower margins on a cheaper treadmill as things to monitor.
Still, Parke sees upside to Peloton’s second quarter of fiscal 2021, which ended in December. He forecasts revenue for the period to be about $1.1 billion, compared with the company’s outlook, which forecasts $1 billion. Parke also thinks Peloton, which has yet to announce an earnings report date, could end the quarter with nearly 1.7 million connected fitness subscribers. It entered the quarter with 1.3 million such subscribers.
Peloton stock closed up 3.2% to $158.88 per share on Friday, while the S&P 500 was up 0.5%.
Write to Connor Smith at [email protected]
