Peloton Interactive (PTON -5.62%) is going to feel the effect of its treadmill recall financially, an analyst believes, but the growth of the at-home fitness trend will do a lot to soften the blow.
Still, he just slashed his price target on the manufacturer of home fitness equipment from $180 per share to $120, even as he maintained his buy rating on the stock.
Image source: Peloton Interactive.
Argus Research analyst John Staszak told investors in a research note that because Peloton's Tread+ treadmill was implicated in the death of a child and dozens of injuries, it's going to face substantial product liability issues.
There was also a second recall involving its lower-cost Tread device over the possibility of the touchscreen detaching during use and creating the risk of injury, though no such accidents have been reported.
These issues will weigh on Peloton's stock price, though it has already regained the ground it lost in the aftermath of the news. Staszak's target also implies there is 20% more upside to the stock from its current $100 level.
That's likely due to the robustness of the at-home fitness trend because consumers discovered during the pandemic that they preferred working out at home instead of going to the gym. That should help Peloton Interactive cycle past the recall issue, and he sees the long-term potential of its brand remaining strong.
Peloton just issued a software update to its treadmill that adds a "locking" feature to the equipment by shutting it off after 45 seconds of non-use. A four-digit code will then need to be entered to activate it again.
About 125,000 treadmills were recalled, and Peloton is offering refunds for those who want them. Or it will pay to have the device moved to a more secure location in the home.
