BofA Wants To Take Peloton's Stock For A Spin

Exercise equipment maker Peloton Interactive Inc PTON is well-positioned to take advantage of multiple catalysts that bode well for the stock in 2020 and beyond, according to BofA Securities.

The Analyst

Justin Post maintains a Buy rating on Peloton with a price target lifted from $30 to $35.

The Thesis

Post said Peloton is showing growth in key user metrics, including Connected Fitness Subscribers completing 7.5 workouts per month in 2017, 8.4 in 2018, and 11.5 in 2019. The rise in usage makes the case for customers to justify spending the $40 per month subscription cost as it averages out to $3 to $4 per workout.

Meanwhile, Post said the competitive environment may not be as intense as bears assume it to be. Specifically, Peloton's monthly app downloads over the past six months "far exceeded" its competitors and total monthly downloads in January hit 344,890 versus 98,113 by NordicTrack.

Other catalysts to spur growth in the coming years include a lower-priced tread has yet to be confirmed but could come in early 2020, expansion to new markets that boast high fitness penetration and spend, and the company plans on spending $101 million in 2020 on R&D to increase market share and improve the customer experience.

Price Action

Peloton's stock traded lower by 1.4% at $30.81 per share at time of publication.

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