Even after surging 60% over the past month, plenty of gains still lie ahead for Peloton Interactive's (PTON -2.86%) investors.
So says JMP Securities analyst Ronald Josey, who boosted his target price on Peloton's stock to $59, up from his prior forecast of $53. Josey also reiterated his market outperform rating on the stock, following the exercise equipment maker's strong third-quarter results.
"Peloton announced it surpassed 1 million net CF [connected fitness] subscribers at a rate significantly faster than we had expected, reinforcing our belief that consumer fitness behavior is fundamentally changing due to COVID-19 and that Peloton is well-positioned to benefit as demand continues to accelerate," Josey said.
Josey expects Peloton to benefit from gym closures during the coronavirus pandemic. He estimates that 90 million gym members have been affected by closures in Peloton's core markets.
The COVID-19 crisis could also make many fitness enthusiasts reconsider going to gyms even after they reopen, for fear of being infected with the novel coronavirus. Judging by Peloton's stellar sales growth -- revenue soared 66% year over year, to $524.6 million in the third quarter -- many people are instead choosing to invest in fitness equipment so they can work out at home.
Josey also said that Peloton is benefiting from word-of-mouth advertising, as happy customers recommend its offerings to their friends and family. This could help Peloton keep a lid on marketing expenses, thereby boosting its future profitability.