Even after surging 60% over the past month, plenty of gains still lie ahead for Peloton Interactive's (PTON 5.01%) 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.
JMP Securities analyst Ronald Josey says surging subscriber counts could send Peloton's stock sharply higher. Image source: Peloton.
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.
