Peloton Analyst Cuts Price Target By 45% Following Latest Sell-Off

Peloton Interactive Inc PTON shares were rallying by 11% midday Friday but remain down about 83% over the last year. CNBC reported this week that Peloton is temporarily halting production of its bikes and treadmills to control costs as fitness equipment demand wanes.

In response to the latest news, one Wall Street analyst reduced his price target for Peloton by 45%.

The Peloton Analyst: On Friday, Bank of America analyst Justin Post reiterated his Buy rating for Peloton and cut the price target from $74 to $40.

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The Peloton Takeaways: Post's new $40 target still represents 60% upside from current levels, and he said he remains bullish on the stock even after the release of a new letter to Peloton employees preannouncing a subscriber miss in the fiscal second quarter.

Peloton's subscriber count reportedly rose to 2.77 million during the fiscal second quarter, short of the company's guidance range of between 2.8 million and 2.85 million. In the internal memo, Peloton CEO John Foley said CNBC was lacking context on Peloton's production plans.

Post conceded that Peloton has had a difficult year but said the sell-off in the stock seems a bit too pessimistic.

"We think pressure on new adds from the reopening (also impacting Netflix) and unusual (and unsustainable) competition will diminish over time, while low churn in the quarter (0.79%) suggests the value proposition continues to resonate with members," the analyst said.

Post is projecting Peloton will reach 8 million subscribers within eight years and will end fiscal 2022 with 3 million subscribers.

Benzinga's Take: If Peloton can stop the bleeding at some point and stabilize its business, the stock could eventually make an attractive dip-buying opportunity. Unfortunately, the second-quarter preannouncement suggests it will be at least another quarter before Peloton can start to convince skeptical investors that it remains an attractive, profitable long-term growth trajectory.

Photo courtesy of Peloton.