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Peloton Is a Buy With Nearly 60% Upside After Controversy, Says Analyst

By Eric Volkman - Apr 19, 2021 at 5:51PM

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The company's shares have taken a hit since a fatality was apparently caused by one of its products.

Engulfed by controversy following the death of a child apparently caused by one of its exercise machines, Peloton Interactive (PTON -0.55%) is nevertheless a buy. So says Stifel analyst Scott Devitt, who on Monday reiterated his buy rating on the stock at a price target of $170 -- almost 58% above the most recent closing price.

It's a counter-intuitive move as the government's Consumer Product Safety Commission bluntly advised people over the weekend to stop using the Peloton Tread+, the product that allegedly caused the fatality. The Commission "believes the Peloton Tread+ poses serious risks to children for abrasions, fractures, and death," citing "multiple reports of children becoming entrapped, pinned, and pulled under the rear roller of the product."

A Peloton Tread+ in a neutral space.

Image source: Peloton Interactive.

It said that it is aware of 39 incidents of injury, including one death, resulting from use of the machine.

Peloton fired off a response, characterizing the recommendation as "misleading" and "inaccurate." It said that the Tread+ "is safe for the home when used in accordance with warnings and safety instructions."

Devitt believes Peloton will find a way to make Tread+ safer and will thus manage to keep it on the market. "We expect the issue regarding the Tread+ could end with a protective guard added to the end of the treadmill or a similar remedy," he wrote in a research note.

"While we don't believe the event will have lasting consequence for the company, the timing of it isn't great given the short-term vulnerability the stock has to increased human mobility ... we would be patient buyers of PTON shares on price pullbacks like [what] has been presented today," he added.

On Monday, Peloton was among the market's big losers, shedding nearly 7.3% of its value against only a 0.5% decline for the S&P 500 index.

 

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Stocks Mentioned

Peloton Interactive, Inc. Stock Quote
Peloton Interactive, Inc.
PTON
$9.13 (-0.55%) $0.05
Stifel Financial Corp. Stock Quote
Stifel Financial Corp.
SF
$56.00 (-0.04%) $0.02

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