Peloton Stock Skyrockets: Here’s Why Investors Are Piling In
Peloton shares are on a tear—and Wall Street's scrambling to justify the rally. The connected-fitness play defies gravity (again) as meme-stock energy collides with whispers of a buyout.
Short squeeze or smart money? Bulls point to a surprise EBITDA beat while bears mutter about 'zombie stock fundamentals.' Either way, the algos are feasting.
Just don't mention the 2022 crash. Today's traders have the memory span of a goldfish—and the risk appetite of a crypto degen.
Signs of improvement
Peloton, a Maker of exercise equipment and content, has seen its stock get absolutely crushed since the main years of the pandemic, as people returned to the gym following the reopening of the economy, among other issues. But now shares are attractively priced, according toanalyst Arpine Kocharian, who upgraded the stock to a buy rating and raised the price target from $7 to $11.50.
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"We see subscription price increases anchoring near-term top line growth, we might also see underlying net subscriber decline stabilizing, outside of price increase driven churn," Kocharian wrote in her research note. "While that inflection in connected fitness subs is not entirely clear to us yet, we are seeing better data trends for Peloton in terms of traffic and active users."
Kocharian is modeling $90 million to $100 million in annualized revenue from increases in subscription pricing. The UBS team is also modeling for EBITDA (earnings before interest, taxes, depreciation, and amortization) to come in between $400 million and $450 million in fiscal year 2026, significantly higher than consensus estimates.
Attractive valuation
At a roughly $2.5 billion market cap, the stock trades at less than 7 times' Kocharian's EBITDA forecast. However, investors should keep in mind that Kocharian is much higher than other analysts on her projection. While Peloton will likely never be the darling it was during the pandemic, the fundamentals do seem to be improving.
Peloton is certainly not one of my favorite stocks in the market, but the risk-reward proposition has improved, which is why I think interested investors can start to nibble on the stock.
