There is faith in a stock, and then there is really believing in stock.
The latter is where Deutsche Bank analyst Chris Woronka sits with Peloton.
The analyst cut his price target on Peloton on Friday in light of the affiliated fitness player’s dismal earnings on Thursday. But even with the cut, Woronka’s $24 price target estimates a nearly 130% upside in a stock that has lost 91% over the past year amid much struggle.
“While the market is clearly skeptical about PTON’s ability to get there, we would not underestimate the enormity of the changes PTON is making operationally or the speed with which decisions are made and new processes are initiated,” Woronka wrote in a note to customers. “We are well aware that regenerating revenue while reducing costs is an extremely difficult task and is not often successful. But we believe that PTON’s story is very different and we believe that F4Q22 is likely to prove to be the nadir from which it can begin a sustainable recovery”.
Peloton stock fell more than 4% on Friday, trading around $10.50 as of 1:25 p.m. ET., after plummeting 18% on Thursday.
Woronka argued that there is hope for brighter days ahead for Peloton under new CEO Barry McCarthy.
That said, the analyst added, “each quarter becomes incrementally more crucial to restoring some modicum of confidence in the company’s ability to simply return to breakeven EBITDA.”
In the eyes of other analysts, the past four quarters show that Peloton hasn’t done much to warrant such optimism about its future prospects.
The company’s quarterly revenue in its fiscal fourth quarter was up 28% as members exited the workout platform. Peloton’s loss per share – which included restructuring costs of $415 million – totaled $3.68 per share. And the company’s adjusted EBITDA [earnings before interest, taxes, depreciation, and amortization] posted a loss of $288.7 million in the quarter.
Peloton has now lost about $1.5 billion in total over the past two fiscal years.
Less optimistic analysts say Peloton will soon be forced to raise cash to drive McCarthy’s turnaround plan.
That possibility, combined with weak fundamentals, led longtime Peloton bear Simeon Siegel of BMO Capital Markets to maintain his underperform rating on the stock. Siegel Price Target: $9.75.
“While most headlines are pointing out that PTON shares are down nearly -95% from their peak, we believe the most important flag is that PTON’s market cap is still ~$4 billion,” Siegel wrote in a note to clients. “Subscription revenue is great (upset, but great). But we fear that growth is on the back burner and efforts to continue to expand will prove to be diminishing returns. Bear Hug brand loyalists enjoy recurring revenue and we see a healthy business, not a $5B+ business, but a healthy repeat business. Continue to grow and we’re afraid the pressure on the flywheel is only getting stronger.”
Brian Sozzi is editor-in-chief and Anchor on Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and up LinkedIn.
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