Peloton Interactive (NASDAQ: PTON) has had a rough ride in recent years. Once a $50 billion company with shares trading at over $150, it has experienced a heavy downfall caused by shifting consumer behavior as the world moved beyond the pandemic. Subscriber growth has stalled, equipment sales have declined, and the company has been forced to repeatedly downsize its workforce—including its CEO stepping down.
Shares are down -55.5% in the past year, and the stock trades in the $3-4 range. The company is taking steps to turn around its fortunes, and the stock trades at a relative discount, suggesting it could be a savvy value trade at some point. At this point, however, investors may want to hold off and continue observing the company’s efforts, looking for signs of progress in the next few quarters.
Peloton Tries to Move On
Peloton, the world’s largest interactive fitness platform, offers technology-enabled fitness classes to more than six million members from anywhere at any time. These classes include a range of wellness disciplines such as indoor cycling, strength training, yoga, and others.
Recent turbulence has seen significant leadership changes, with CEO Barry McCarthy, known for his Netflix background and expertise in subscription services, departing after two years.
In another development, Peloton stocks saw an upswing following a CNBC report hinting at a potential buyout by multiple private equity entities. This news adds an intriguing element to the company’s ongoing efforts to refinance its debts and achieve profitability after 13 consecutive quarters of losses.
Peloton’s Recent Financial Results
The company recently announced results for its fiscal third quarter of 2024. Revenue dipped to $717.7 million, marking a 4.2% decline from the same period in 2023. Subscription revenue saw modest growth, up by 3%. This helped offset somewhat the 12% decrease in the hardware segment, resulting in a total reduction of only 3%. The company narrowed its net loss by 39% to $167.3 million, resulting in reported earnings per share of -$0.45, which fell short of analysts’ estimates of -$0.37.
The company also announced a comprehensive refinancing of its debt structure, obtaining more flexible loan terms and extending its debt maturities. It successfully closed a new $1 billion five-year term loan facility, raised $350 million via an upsized private offering, and secured a new $100 million five-year revolving credit facility with JP Morgan and Goldman Sachs.
Using the net proceeds from these new credit facilities and the notes, along with its cash reserves, Peloton strategically repurchased approximately $800 million of its 0% convertible senior notes due in 2026 at a discount, refinanced its existing term loan and revolving credit facilities, and covered any associated fees and expenses.
What Is the Price Target for PTON Stock?
Analysts following the company have taken a cautious approach to the stock. Citi analyst Ronald Josey, a five-star analyst according to Tipranks ratings, recently downgraded his rating on the shares from Buy to Neutral and lowered the price target from $8 to $4. He noted that the company could see positive free cash flow post-reorganization. However, he awaits details about Peloton’s strategic direction once new management is announced.
Peloton Interactive is rated a Hold based on the ratings and price targets assigned over the past three months by 17 Wall Street analysts. The average price target for PTON stock is $4.22, representing a 15.93% upside from current levels.
The stock has been on a downward trend over the past three years, losing over 96% in that time. It has been range-bound between $3 and $4 for most of this year and currently trades at the lower end of its 52-week price range of $2.70 to $9.87. The stock trades at a relative value with a P/S ratio of 0.48x, compared to the Consumer Cyclical sector average of 1.29x and the Leisure industry average of 1.74x.
Last Word on Peloton
Peloton appears determined to revive its fortunes. The company’s efforts, which include a comprehensive debt refinance and potential buyout news, paint a picture of a company actively seeking to steer the ship around at a pivotal time in the company’s history. However, as recent financial results revealed, the road to recovery is filled with obstacles, meaning investors may want to cautiously observe Peloton’s progress over the next few quarters.
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