Peloton Stock Downgraded at UBS on Valuation

UBS analysts downgraded Peloton shares to neutral, saying the exercise-equipment and -services company is fairly valued right now.
Publish date:

Peloton Interactive  (PTON) - Get Report shares fell after UBS analysts downgraded the fitness-product and -services company to neutral from buy on valuation concern.

The analysts raised their share-price target to $58 from $48 to reflect recent market activity and their increased earnings estimates.

“We believe the stock is fairly valued at these levels, as investors are already pricing in a high degree of expectations for forward subscriber/revenue growth and [for a] path toward profitability in the coming years,” the analysts wrote in a commentary cited by Bloomberg.

The New York company's stock recently traded at $60.83, down 3.7%. The stock has more than doubled year to date.

The UBS analysts increased their estimates for revenue from both connected fitness products and subscriptions, Bloomberg reports.

The analysts forecast compound annual revenue growth of 60% for fiscal 2019 to fiscal 2022, compared to analysts’ consensus of 61%.

With people staying at home because of the coronavirus epidemic, more consumers are opting for fitness options in their domiciles.

The analysts also boosted their estimates for earnings before interest, taxes depreciation and amortization, thanks to the higher revenue and lower sales and marketing costs, according to Bloomberg. Peloton has suspended its media advertising.

Last week, Wedbush analyst James Hardiman removed Peloton from the firm’s Best Ideas List also based on valuation.

But he affirmed his outperform rating and $63 share-price target on the company.

Peloton stock traded at $22.25 when Wedbush placed the shares on the Best Ideas List in mid-March. 

Hardiman remains of the “belief that the company has considerable runway for outsize growth,” he wrote in a commentary cited by Barron’s.