Goldman Sachs Downgrades Peloton After 458% Gain, Shipping Delays

One notable analyst is downgrading the exercise biker maker's stock after a 458% gain.

The Peloton Analyst: Goldman Sachs analyst Heath Terry downgraded Peloton Interactive PTON from Buy to Neutral with a $140 price target.

The Peloton Thesis: “We continue to believe in the long term opportunity and Peloton and expect that the current pandemic will continue to both accelerate and steepen the adoption curve for the company’s leading connected fitness products," Terry wrote in a note.

Terry said Peloton has outperformed and trades near the price target of $140 “ahead of our expected timeline.” Shares of Peloton are up 458% since Terry added a Buy rating in October 2019, compared to a 14% gain for the S&P 500 over the same time.

Peloton recently began notifying customers about shipping delays, which Terry said gives risk to guidance. Shipping delays are coming from congestion at the Port of Los Angeles.

“Given the backlog of orders, the launch of Bike+," the analyst wrote, "and efforts at increasing production, we expect the company to report 276k net adds, above their guidance of 229k-239k.”

Related Link: Peloton CEO Says Apple Fitness+ Legitimizes Exercise Market

Terry is estimating revenue to hit $829 million for the first quarter versus guidance of $720 million to $730 million.

Peloton is spending less on advertising due to the strong backlog and shipping delays, which Terry said “should contribute to profitability above their guidance for the quarter.”

Peloton spent $23.1 million, $11.5 million and $7.7 million on media spending in January, February and March, respectively. The company did not spend more than $1 million a month on media spending a single month since until September with $1.1 million.

PTON Price Action: Shares of Peloton are down slightly Thursday to $123.21.