There is having belief in a stock, and then there is really believing in a stock.
The latter is where Deutsche Bank analyst Chris Woronka stands with Peloton.
The analyst cut his price target on Peloton on Friday in light of the connected fitness player’s dismal earnings on Thursday. But even with the cut, Woronka’s $24 price target estimates a nearly 130% rise in a stock that has lost 91% in the past year amid a multitude of struggles.
“While the market is clearly dubious about PTON’s ability to get there, we wouldn’t underestimate the sheer magnitude of changes PTON is making operationally, or the speed at which decisions are made and new processes rolled out,” Woronka wrote in a note to clients. “We’re well aware that regrowing revenues while simultaneously reducing costs is a remarkably tall order and one that isn’t often successful. But we think PTON’s story is a nuanced one, and we believe F4Q22 is likely to prove to be the nadir from which a sustainable turnaround can commence.”
Peloton stock dropped more than 4% on Friday, trading around $10.50 as of 1:25 p.m. ET., after plummeting 18% on Thursday.
Woronka reasoned there’s hope for brighter days ahead for Peloton under new CEO Barry McCarthy.
That said, the analyst added, “each quarter becomes incrementally vital to restoring some modicum of confidence in the company’s ability to simply get back to breakeven EBITDA.”
In the eyes of other analysts, the past four quarters show that Peloton has done little to warrant such optimism about its future prospects.
The company’s quarter revenue in its fiscal fourth quarter tanked 28% as members rolled off the workout platform. Peloton’s loss per share — which included $415 million in restructuring charges — totaled $3.68 per share. And the company’s adjusted EBITDA [earnings before interest, taxes, depreciation, and amortization] came in at a $288.7 million loss in the quarter.
Peloton has now lost about $1.5 billion total in its last two fiscal years.
Less optimistic analysts say Peloton will soon be forced to raise cash to drive McCarthy’s turnaround plan.
That possibility, coupled with weak fundamentals, led longtime Peloton bear Simeon Siegel of BMO Capital Markets to stick to his underperform rating on the stock. Siegel’s price target: $9.75.
“Although most headlines flag that PTON shares are down almost -95% from peak, we believe the more important flag is that PTON’s market cap is still ~$4B,” Siegel wrote in a note to clients. “Subscription revenues are great (churning, but great). But we fear growth is in the rearview and attempts to keep expanding will prove profit eroding. Bear hug brand loyalists enjoy recurring revenue, and we see a healthy business; not a $5B+ business, but a healthy recurring business. Continue growing, and we fear the flywheel pressures simply grow stronger.”