Peloton Interactive bulls on Wall Street still see long-term potential

Sep. 19, 2022 9:47 AM ETPeloton Interactive, Inc. (PTON)By: Clark Schultz, SA News Editor11 Comments

Peloton Pauses Production Of Its Bike As Demand Decreases

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Oppenheimer took up the bull case on Peloton Interactive (NASDAQ:PTON) again with an updated forecast on Monday for a slightly smaller loss and a bottoming out of sales declines.

For the current quarter, Oppenheimer expects revenue growth to contract about 20%, consistent with Street expectations and guidance for a decline of 19% to 22%. Looking ahead, analyst Brian Nagel and team said they "optimistically" anticipate revenue growth to rebound to the upper-single/low-double digits rate.

Peloton's new fitness-as-a-service offering is seen a potential incremental sales driver for PTON. While still early, Nagel said the firm is impressed with the initial economics and view FaaS as a driver of incremental sales and subscription growth for PTON in the years ahead.

As for capital raises, Oppenheimer expects PTON should require an additional $1B in outside funding through FY25, which could create short-term selling pressure. However, the long-term takeaway for investors from Oppenheimer is that shares underappreciate the longer-term potential for Peloton Interactive (PTON). The firm's 12-month to 18-month price target of $20 is predicated upon EV-to-sales and gross profit multiples of 2.0X-3.0X and 6.0X-8.0X off the estimated FY25 sales and gross profit numbers.

Peloton Interactive (PTON) opened the week flat after an 8.80% share price drop on Friday.

While Wall Street bulls are sticking with PTON, the Seeking Alpha Quant Rating is still flashing Sell.

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