Shares of Peloton Interactive (PTON 0.49%) hit a new all-time low on Friday. One analyst believes that the stock can head even lower in the near term.
Arpine Kocharyan at UBS is slashing her price target from $8 to $4 this week. She is sticking to her sell rating, a market call that has been particularly astute when it comes to the beleaguered connected fitness pioneer. The stock has shed nearly half of its value in 2023, down a brutal 97% from the all-time peak it reached in early 2021.
A lot has gone wrong at Peloton after the initial pandemic surge for its stock and its products. Things aren't getting better, according to Kocharyan. After a positive trend in visits to the Peloton website in May and June, the data that she's seeing shows traffic taking a negative turn in July and August.
NASDAQ: PTON
Key Data Points
Working up a sweat
The analyst cutting her price target in half on Monday doesn't translate into a sharp drop from current levels. Falling to $4 would be just a 10% decline from the fresh lows it hit on Friday. However, Peloton didn't exactly spark any confidence in its turnaround when it announced problematic financial results late last month.
Revenue, members, and app subscribers continue to go in the wrong direction. All three metrics clocked in with year-over-year and quarter-over-quarter declines for the fiscal Q4 that Peloton announced this summer. Losses continue. Churn rates are still high.
Image source: Peloton.
Revenue slumped a modest 5% in last month's report, marginally better than expected. However, the top-line performance is a result of a 10% increase in subscription revenue and a 25% drop in sales of its connected fitness products. If folks aren't making four-figure investments in new Peloton gear, it's hard to get excited about its growth prospects given a thin pipeline of fresh walkers, runners, and bikers on its high-end equipment.
The thorny challenge for Peloton is winning its reputation back. It's hard for a premium brand to recover its momentum once its appeal is squandered. Peloton has been on the wrong end of headlines and Hollywood storylines. Check out Peloton's recall page and there is information about four different products with repair or replacement instructions.
There have been rare accidents with Peloton treadmills that have proven tragic for young children and pets. Earlier this month, the family of a New York man initiated a lawsuit against the connected fitness specialist over a freak accident that ended his life. A Peloton workout has factored into the scripted passing of a TV show character at least twice. Horrific accidents happen with all products, but it's a particularly bad look for Peloton. When your market positioning is that your platform helps enhance the quality of life, you don't want the rare mishaps amplified or turned into fodder for Hollywood writers.
Peloton is not in a good place. It's not a coincidence that it stopped reporting its subscriber engagement metrics earlier this year. The reopening of the economy after folks were sheltering in place early in the COVID-19 crisis was great for gym stocks, but it also marked the peak for Peloton.
This workout doesn't have to end all sweaty and messy. Peloton is a prime buyout candidate, and maybe its fortune could change under new ownership taking a fresh approach to the premium fitness brand. However, investors have been saying this all the way down over the last two years. Peloton is still tired, and like one of its stationary bikes, there's a lot of effort going nowhere right now.
