What happened
Shares of exercise-equipment company Peloton Interactive (PTON 4.79%) pulled back again on Friday after a sharp price-target reduction from an analyst. As of 11:50 a.m. ET today, Peloton stock was down 6% even though the market averages were up sharply.
So what
Arpine Kocharyan, an analyst with UBS, has a sell rating on Peloton stock. And today, she aggressively lowered her price target from $13 per share to just $8, according to The Fly. To her credit, she's consistently held a sell rating on Peloton stock and has lowered her price target as it's fallen. In other words, Kocharyan's move today is in line with her previous stance.
Specifically, Kocharyan doubts Peloton can return to sales growth. And she's unsure that the company can successfully execute its cost-saving initiatives and consequently grow its profits. With so many question marks with Peloton, it's not a surprise to see the market react negatively toward the stock after Kocharyan's comments.
Now what
To Kocharyan's point, Peloton announced an $800 million plan for annualized savings back in February. Of this, management expected to save $500 million in operating expenses. In its most recent quarter, management said it's ahead of schedule with progress for these operating expenses.
That's good. However, operating expenses still more than doubled year over year in the most recent quarter, surpassing $1 billion.
Many of these recent operating expenses are one-time charges, and management is making progress on other operating expenses, including sales and marketing. But the takeaway is: Even if Peloton is making progress in its turnaround, Kocharyan's doubts are valid because the company still has a long ways to go.
