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Peloton Stock: Why Wall Street Is Still Bullish

Despite its shares being in free fall, the Wall Street consensus remains bullish on PTON. Here's why.

Peloton  (PTON) - Get Peloton Interactive, Inc. Class A Report was one of the most talked-about stocks on the web last week. It plummeted more than 20% in just one trading session after the media reported the company will halt production, close several stores, and lay off staff.

However, on January 20, the company released preliminary second-quarter financial results that were in line with Wall Street expectations.

Peloton saw tremendous growth during the pandemic due to the closure of gyms and offices. However, since the world has reopened, its stock has suffered significant losses — more than 80% from its 2020 peak.

Although Peloton stock is near all-time lows, Wall Street experts remain bullish on PTON. They think right now is a good opportunity to buy it cheap.

Let's look further.

Figure 1: Peloton Stock: Why Wall Street Is Still Bullish

Figure 1: Peloton Stock: Why Wall Street Is Still Bullish

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It's All About Growth

The COVID pandemic brought chaos to much of the economy. However, companies that rode the wave of "stay at home" trends saw accelerated growth in 2020. That was certainly the case with Peloton, whose interactive fitness products filled a void left by gym closures.

Peloton recorded revenue growth of over 200% in the first quarter of its fiscal 2020, compared to 2019. It continued to record growth of over 100% through the third quarter, driven by significant subscriber growth that more than doubled in 2020.

Figure 2: Peloton conected fitness subscribers growth.

Figure 2: Peloton conected fitness subscribers growth.

However, although growth in 2021 was lower than in 2020, it remained strong. Peloton registered more than 1 million new connected fitness subscribers last year.

The company is slated to release second-quarter earnings results on February 8. But last year, Peloton management reported preliminary results that beat Wall Street expectations. For the quarter, Peloton said it expects revenues of approximately $1.14 billion, versus previously provided guidance of $1.1 billion to $1.2 billion.

Peloton Stock Drops

Despite these preliminary results beating the experts' expectations, Peloton stock lost more than 20% when the media reported that the company is planning to cut more than 40% of its sales and marketing staff, to close 15 retail stores, and to temporarily halt the production of its connected bike and treadmill.

CEO John Foley denied this latter claim.

But despite mounting pressure on PTON stock, Wall Street analysts have remained bullish on the company for the long term.

The current consensus is that PTON remains a moderate buy with an average price target of $53.25, indicating an upside of almost 90%.

Stifel Nicolaus upgraded Peloton stock from a hold to a buy, keeping the price target at $40. The firm remarked that the share price has corrected itself relative to underlying business conditions.

Oppenheimer cut its price target nearly in half, from $85 to $40, based on pre-announced weak second-quarter net customer additions. But the firm still remains bullish on Peloton’s business model for the long term.

And Deutsche Bank significantly decreased its price target for Peloton to $42 from $76 but remains bullish on PTON. The firm noted that a reassuring letter from CEO John Foley and the pre-announced second-quarter results would help calm some of the selling pressure.

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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)