Peloton Gets a Mixed Review From BMO Ahead of Earnings

Peloton is scheduled to release earnings after the closing bell on Wednesday.
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Investors are no doubt waiting for Peloton Interactive's  (PTON) - Get Report fourth-quarter earnings after the closing bell Wednesday following the company's much-discussed holiday season advertising push.

Analysts at BMO Capital initiated coverage on shares of the maker of at-home fitness bikes with a muted market perform rating and $27 price target , indicating a downside from the stock’s closing price Monday of $33.37.

While the firm is bullish on the company’s product, it does have concerns about the total addressable market for home exercise machines. BMO attributed Peloton's decision to cut prices in the fourth quarter as a possible response to a dip in digital memberships, which obviously isn’t a good sign for the company.

“Given the strength of its following and dominant leadership position, we believe PTON could have raised prices for years for a constrained but devoted Connected Fitness community,” analyst Simeon Siegel wrote. “PTON recently lowered its Digital subscription price to attract more customers. We worry this may pit PTON against itself as the wider the price delta between the offerings, the more the C.F. (connected fitness) subscriber will be forced to rethink the value proposition.”

The firm’s price target represents a 30 times multiple on forward earnings driven by assumed revenue of $3 billion. Peloton is expected by analysts to report a quarterly loss Wednesday of 36 cents a share on revenue of $422.9 million.

The company reported a wide miss in the third quarter, its first quarter as a publicly traded company, with a loss of $1.29 a share vs analysts’ expectations of a loss of 36 cents.