As 2023 concludes, analysts are offering their outlooks and stock predictions for the upcoming year, and Peloton Interactive (NASDAQ:PTON) is at the center of attention. While overall sentiment toward the pandemic-era favorite remains cautious, a few bullish voices on Wall Street believe that this once-beaten-down growth stock could stage a substantial comeback in 2024, with one superfan even suggesting the potential for the stock to triple from its current levels.
Peloton Interactive Overview
Peloton, headquartered in New York, is an exercise equipment company known for designing, manufacturing, and marketing fitness products such as treadmills, stationary bikes, and rowers. The company also provides a digital fitness platform with various subscriptions, attracting over 6.7 million users participating in fitness lessons ranging from indoor cycling and running to yoga and meditation.
Amid the COVID-19 lockdowns, Peloton thrived as home fitness products gained popularity. However, challenges emerged as local gyms and fitness centers fully reopened. CEO Barry McCarthy, who assumed leadership in 2022, implemented cost-cutting measures, including workforce reductions, manufacturing shifts offshore, and new sales partnerships with major names like Amazon (AMZN) and Dick’s Sporting Goods (DKS). With only $748 million remaining in cash reserves, achieving profitability soon becomes crucial for Peloton.
Performance and Projections
In 2023, Peloton shares declined by 20%, but they rebounded by 48% from October’s 52-week low of $4.28. The Q1 2024 earnings report revealed wider-than-expected losses of $0.44 per share, although revenue of $595.5 million surpassed estimates. CEO Barry McCarthy highlighted the bike rental service as a “big growth opportunity,” projecting a 90% year-over-year revenue growth for FY 2024 in this segment.
Wall Street’s 2024 revenue forecast stands at $2.75 billion, aligning with management’s guidance range and indicating a projected annual revenue decline of 1.92%. Analysts anticipate a return to revenue growth in fiscal year 2025, with sales projected to rise by 4.89% to $2.88 billion. PTON’s current valuation, priced at about 0.8x forward sales, is considered relatively inexpensive for a consumer discretionary stock.
Analyst Perspectives
Despite underperforming in 2023, Peloton does not yet appear to be a consensus bargain among analysts. The stock holds a consensus “Hold” rating on Wall Street, downgraded from a “Moderate Buy” two months ago.
Brian Nagel of Oppenheimer, with the Street’s highest price target of $20, remains optimistic about Peloton’s prospects. Nagel sees the existing consumer engagement as a positive factor, supporting the brand’s long-term potential. His “Buy” rating reflects confidence even after fiscal Q1 results.
The mean price target for PTON is $8.16, indicating a potential upside of 30.9% from current levels. Notably, Oppenheimer’s target implies an optimistic outlook, suggesting that Peloton could more than triple over the next year.
Of the 23 analysts covering the stock, 6 rates it as a “Strong Buy,” 14 as a “Hold,” 1 as a “Moderate Sell,” and 2 as a “Strong Sell.” The diversity in ratings underscores the differing opinions on Peloton’s future trajectory.
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