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Analyst Slashes Peloton Price Target 33% Over Treadmill Recall

By Rich Duprey - May 21, 2021 at 8:16AM

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But he still thinks the home fitness leader is a long-term buy.

Peloton Interactive (PTON -2.16%) 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.

Female Peloton instructor running on a treadmill

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.

Rich Duprey 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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