If you’re looking to pick up a former all-conquering growth stock that has crashed and burned, then Peloton (PTON) is one such name.
Down by a miserable 78% over the past year, the stock has suffered as growth names have fallen out of favor, although the home exercise specialist has had a long list of company specific issues to contend with which have sent investors to the exit gates. These include dwindling demand in the post-pandemic era, recalled bikes over safety concerns, a significant toning down of the workforce as part of cost saving measures and a change of personnel in the C-Suite.
However, it is the latter change which Deutsche Bank’s Chris Woronka believes could help put a transformation into place. “We believe the recent management change has the potential to result in a host of positive changes at the company that should ultimately manifest themselves in a meaningfully improved growth profile going forward,” the analyst opined.
That said, while Woronka remains “bullish on the long-term potential of the company to fulfill the vision of connected fitness in a profitable way,” the analyst concedes that in the near term Peloton has to “cross a lot of hurdles” to achieve that aim.
Nevertheless, Woronka thinks Peloton has enough going for it to help make that vision a reality. As evidenced by the the low churn rates, the company has “brand loyalty and stickiness among its customer base” on its side. Additionally, the subscription model boasts a “visible and predictable income stream” which over time increases while also featuring a “higher contribution margin.”
And the company currently has 2.8 million total connected fitness subscribers, yet with an expected SAM (serviceable addressable market) of 15 million, there’s ample room for long-term subscriber growth.
But the onus is on the company to prove its ambitions are not just wheels turning on thin air. “As management changes take-root, and a more normalized post-COVID demand environment reveals itself, we believe that investors will be keying on 2H22 and the holiday quarter as key markers of success,” Woronka noted.
So, interesting times ahead for Peloton, but what does it all mean for investors? Woronka has a Buy rating for the shares, backed by a $51 price target, suggesting room for 117% growth in the year ahead. (To watch Woronka’s track record, click here)
What does the rest of the Street think? Looking at the consensus breakdown, opinions from other analysts are more spread out. 14 Buys, 10 Holds and 1 Sell add up to a Moderate Buy consensus. However, there’s plenty of upside predicted here; going by the $46.22 average target, the forecast calls for share appreciation of ~96% over the 12-month timeframe. (See Peloton stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.