Peloton Interactive (NASDAQ:PTON) shares are making new multi-year lows this week. This follows the fitness platform operator’s decision to remove its unlimited free membership tier in less than a year since introducing the feature.
PTON’s Strategy that Failed to Take Off
The free tier was aimed at boosting subscriber numbers on Peloton’s platform. However, the company found it difficult to translate a meaningful part of those free-tier users into paying customers. Once a central part of Peloton’s overarching growth strategy, the free tier is now no longer available. Instead, new users on its app will have to choose between monthly options of $12.99 or $24 after a seven-day free trial period.
Peloton’s Persistent Challenges
Over the past year, Peloton has undertaken rebranding efforts by shifting its focus from hardware to hardware + digital, and pursuing a bike rental model for growth. However, these efforts have largely failed to translate into business gains. In the second quarter, the company’s revenue declined by 6.2% year-over-year to $743.6 million. Its membership numbers decreased by 4% to 6.4 million, and ending paid app subscriptions fell by 16% to 718,000 during this period.
A Cautionary Tale
These challenges have led to a nearly 67% drop in Peloton’s share price over the past year. At $3.22 per share, the stock is now hovering at its lowest level since reaching a peak price of around $127 per share in June 2021
What’s Next for Peloton?
Next, Peloton is scheduled to report its third-quarter numbers on May 8. Analysts anticipate that Peloton will report a net loss per share of $0.36 on revenue of $718 million for the quarter. In the comparable year-ago period, PTON’s EPS of -$0.79 had missed expectations by a wide margin of $0.31.
What Is the Target Price for PTON Stock?
Overall, the Street has a Hold consensus rating on Peloton. Additionally, the average PTON price target of $6.29 points to a nearly 96.9% potential upside in the stock.
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