Peloton Tread
Courtesy of Peloton
Peloton Interactive ‘s treadmill recalls hammered the company’s stock price, sending shares to their lowest levels since September. Not every analyst sees it as a buying opportunity.
Peloton stock (ticker: PTON) sank nearly 15% to $82.62 on Wednesday. That’s the stock’s lowest close since Sept. 16. Peloton shares are down more than 50% from their closing high of $167.42 on Jan. 13. It was the worst performer in the Nasdaq 100, according to Dow Jones Market Data.
The company announced voluntary recalls for its Tread and Tread+. The U.S. Consumer Product Safety Commission said the Peloton Tread+ recall followed the death of one child and more than 70 other reported incidents. The lower-priced Peloton Tread was recalled due to risks of injury related to its touch screen inadvertently detaching. The latter device has not yet released widely in the U.S.
The stock’s dramatic drop, which was one day before the company reports fiscal third-quarter results, led Baird analyst Jonathan Komp to designate Peloton stock a “Fresh Pick” in a bullish note on Wednesday. Komp, who has a $175 price target on the stock, called the concerns about the recalls “overblown,” estimating that the direct financial impact equates to less than one percent of Peloton’s enterprise value.
“GIven any Tread/Tread + sales disruption should prove temporary and demand indicators for Bike/Bike + remain strong, we see a positive trading opportunity relative to recent negative trading action (tied to Tread uncertainty and generally lower sentiment for other technology and ‘stay at home’ plays) and would buy ahead of tomorrow’s earnings report,” Komp wrote.
CFRA analyst Camilla Yanushevsky maintained a Buy rating with a $170 price target. While noting that a majority of Peloton’s hardware sales are related to its bikes, she thinks there are ways the company can enhance the safety of the treadmills.
“While from a PR perspective we think the voluntary recall is a few weeks late, we don’t see it materially impacting PTON’s growth story,” she wrote.
Raymond James analyst Aaron Kessler wrote Wednesday that the recalls may lead some to question the company’s hardware quality control efforts. He added that its combative response last month to concerns from the CPSC now look misguided.
“While positive long-term, near-term headwinds due to Tread and possible softening of demand trends as social distancing measure ease keep us on the sidelines,” he wrote, while maintaining a Market Perform rating.
BMO Capital Markets analyst Simeon Siegel maintained an Underperform rating and a $45 price target. Siegel called Peloton’s decision to reverse its initial response commendable, but he still thinks this episode is a sign the company’s voice and platform grew faster than its business. Peloton, he wrote, “is still working to grow into its fame.”
He worries that “amid multiplying competition, numbers & nuance will begin to matter once again. We highly recommend the product, but remain concerned shares are still pricing in an overly optimistic future outcome.”
Write to Connor Smith at [email protected]
