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Analyst: Peloton Can Expect Lots of Demand, and Has the Capacity to Meet It

By Rhian Hunt – Oct 15, 2020 at 1:02PM

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The bull case sees a holiday shopping boost because of COVID-19.

Exercise machine maker and streaming workout provider Peloton Interactive (PTON -14.44%) got a bullish endorsement from Bank of America today on the basis of the bank's sales forecasts. BofA cited multiple pieces of data supporting its thesis that Peloton is about to make a scorching run off the starting line moving into holiday sales, Seeking Alpha reports.

Bank of America cites surging recent visits to the company's website as a reason for its endorsement. In August, visits to Peloton's site were up 127% year over year, while for September that metric jumped to a 197%. For October's first half, downloads of the Peloton app soared 241% compared to last year.

An exercise bike in a home gym

Image source: Getty Images.

The bank also cites "a robust product pipeline ahead that should help Peloton grow through more difficult COVID comps," referring to the company's revamp of its product line. Peloton is introducing a thrifty Tread model and a high-end Bike+, and dropping the price on its existing Bike to appeal to a wider range of budgets.

Bank of America says "new product launches could drive strong holiday demand," pointing out Peloton now has a considerable order backlog. According to September reporting by Business Insider, sales exploded by 172% in the most recent quarter and the company expects delayed shipments through June 2021. Referring to this rising order volume, CEO John Foley wrote in a letter to shareholders, "we had expected demand to moderate" but "the unexpected resurgence of COVID-19 cases in many states has perpetuated the imbalance of supply and demand."

Bank of America sees this as beneficial to Peloton, noting "a new factory is expected to come online in December potentially doubling capacity." The firm bumped its price target to $150, an approximate 11% upside over the current share value.

Rhian Hunt has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Peloton Interactive. The Motley Fool has a disclosure policy.

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