Peloton's stock experiencing a significant increase this week
In a recent move that signals a positive reappraisal of Peloton's growth potential, UBS analyst Arpine Kocharian has upgraded Peloton Interactive (PTON) from Neutral to Buy and raised the price target to $11.50. This optimistic move values a 46.67% upside from the prior target.
Kocharian's optimism is based on improved confidence in Peloton's prospects, despite current challenges. The analyst sees better data trends for Peloton in terms of traffic and active users, and believes that subscription price increases could anchor near-term top line growth for the exercise equipment and content manufacturer.
However, not all analysts share Kocharian's optimism. Telsey Advisory Group, for example, continues to maintain a Market Perform rating with a lower price target of $8.00. They cite persistent issues like a projected 9% drop in Q4 sales driven by weak hardware demand, tariffs impacting costs, and a subscriber slump. While acknowledging some progress in cost control and strategic initiatives, they highlight the need for clearer signs of subscriber stabilization and hardware demand growth.
Peloton is set to report its Q4 and full-year fiscal 2025 earnings on August 7, 2025. Expectations include continued losses, with an estimated EPS loss of $0.06 and revenue pressures acknowledged. The trade environment, including tariffs on aluminum and China imports, is putting additional free cash flow pressure on the company.
Despite these challenges, Kocharian's EBITDA projection for Peloton is higher than other analysts' projections. The analyst suggests that interested investors can start to nibble on the stock, as it trades at less than 7 times Kocharian's EBITDA forecast. At a market cap of roughly $2.5 billion, the stock appears attractive.
It's important to note that Peloton, despite its past popularity during the pandemic, is unlikely to regain its former status as a darling. However, the risk-reward proposition has improved, and Kocharian does not consider Peloton one of his favorite stocks in the market.
The UBS team is modeling for EBITDA to come in between $400 million and $450 million in fiscal year 2026. Kocharian is projecting $90 million to $100 million in annualized revenue from increases in subscription pricing.
In conclusion, while Kocharian's upgrade signals a positive re-appraisal of Peloton’s growth potential and stock value, industry analysts remain divided with some emphasizing ongoing operational and market challenges that could limit near-term performance. The upcoming earnings report will be key to assessing the company’s progress.
- Arpine Kocharian's optimistic view on Peloton Interactive (PTON) involves investing in the company's stock, as he believes in the potential for growth, despite current challenges.
- The UBS analyst Arpine Kocharian values technology as a critical part of Peloton's business, projecting annualized revenue of $90 million to $100 million from increases in subscription pricing.
- Assessing the risk and reward, Arpine Kocharian suggests that investors, recognizing the potential growth, may now consider nibbling on Peloton stock, which trades at less than 7 times his EBITDA forecast.
