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Peloton Jumps as Analysts Re-Rate on $165 Million Recall Revenue Hit

Wall Street analysts cut their price targets on Peloton after the company says it will take a future hit to revenue of $165 million to recall its Tread and Tread+ treadmills.

Wall Street analysts who follow Peloton  (PTON) - Get Free Report moved to cut their price targets on Friday in the wake of the company’s decision to voluntarily recall its internet-connected interactive treadmills, which Peloton says will result in a future hit of as much as $165 million to revenue.

Peloton shares were up 9% in trading on Friday, recovering from losses posted earlier in the week after the popular high-tech exercise bike maker announced a recall of its Tread and Tread+ treadmills following the death of a child and a warning from the U.S. Safety Product Commission.

Peloton on Thursday reported better-than-expected results in its fiscal third quarter as connected-fitness revenue surged, but said it expects fiscal fourth-quarter sales to take a $165 million hit due to the treadmill recall.

Cowen analysts John Blackledge and Oliver Chen cut their one-year price target to $135 from $177 on the lower fourth-quarter sales forecast, though noted that Peloton is still well-positioned to capitalize on multi-year health and wellness secular tailwinds. They left their outperform rating in place.

Evercore ISI’s Shweta Khajuria and Mark Mahaney, meantime, cut their price target to $105 from $125, noting that while “all in the fundamentals were good,” uncertainty around the treadmill recalls and delayed launch of the new Tread model might limit the stock’s upside. They held their in-line rating on the stock.

Truist analyst Youssef Squali cut Peloton's price target to $125 from $160, though also noted that while the Tread+ safety issues will take time to fix, the new, more popular and cheaper Tread should be back within eight weeks. The anlyst also sees robust bike demand and the return of treadmills contributing to 30% top-line growth in 2022. He has a buy rating on the stock.

Shares of the New York-based company had fallen 36% this year as it struggled with extended delivery times and the easing of COVID-related lockdowns raised concerns about sales growth in coming quarters, making it the worst performer in the Nasdaq 100after soaring more than fivefold in 2020.

At last check, Peloton shares were up 9% at $91.32.