Why This Peloton Analyst Is Pumping The Brakes

Shares of fitness equipment company Peloton Interactive, Inc. PTON are pulling back Wednesday after a negative analyst action.

The Peloton Analyst: Wedbush's James Hardiman downgraded Peloton from Outperform to Neutral and reduced the price target from $130 to $115.

The Peloton Thesis: Engagement data Wedbush tracks across various media platforms, Peloton's own metrics and Google trends show that the year-over-year growth for the company has seen substantial deceleration in the June quarter, Hardiman said.

Some of the deceleration may have to do with seasonal and reopening headwinds, according to the analyst. That said, it appears to be a turning point for Peloton, which has continually defied gravity since its IPO.

A meaningful deceleration is factored into the company's fourth-quarter guidance but the bigger concern for investors is likely to be the 2022 guidance, the analyst said.

Related Link: Apple Fitness+ Vs. Peloton: How Do They Stack Up?

The Bike and Bike+ lead times have come down substantially. The analyst expects deposits to decrease significantly in the fourth quarter and represent a material source of revenues and Connected Fitness Subscriptions.

"Beyond the core bike business, PTON could find the next leg of growth in the form of new products, be it the new Tread or the long-anticipated rower," the analyst wrote in the note.

Peloton now seems to be at an inflection point where it is likely to see normalized growth rates rather than the hyper-growth exhibited throughout the company's history and extended through the pandemic, Hardiman said.

PTON Price Action: At last check, Peloton shares were down 4.2% at $114.78.