Shares of Peloton (PTON) are in the green today after UBS analysts, led by Arpine Kocharyan, upgraded the exercise equipment and media company from Sell to Hold. This was due to the company’s focus on cutting costs, along with its compensation strategy of tying the CEO’s pay to performance, which could help stabilize its finances. While Peloton is struggling to attract new subscribers, UBS sees opportunities for it to manage its expenses better and improve profitability.
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Indeed, the analysts expect Peloton’s EBITDA to grow to $298 million in 2025 and $376 million in 2027, thanks to planned cuts. This includes $50 million in marketing, $15 million in contractor and supply chain costs, and $10 million in IT expenses. These are on top of earlier measures like layoffs and other cost-saving initiatives that will total $200 million.
Still, UBS noted that Peloton’s growth outlook is shaky. In fact, website traffic dropped 5% in October, and monthly active users fell 19% compared to last year. However, it is worth noting that on a quarter-to-date basis, as pictured below, website traffic is actually up almost 24% year-over-year, according to TipRanks’ data. Nevertheless, subscription prices could also slow subscriber growth. But even with these challenges, UBS raised its price target for Peloton significantly from $2.50 to $10 per share.
Other Analysts Also Raised Their Price Targets
Interestingly, UBS is not the only investment firm that raised its price target on PTON. Indeed, five-star analysts, such as Macquarie’s Paul Golding and Robert W. Baird’s Jonathan Komp, upped their targets to $9 and $8 per share, respectively. For reference, both previously had targets below $5 per share. Interestingly, they also have Hold ratings on PTON stock.
Is PTON a Buy or Sell?
Overall, analysts have a Hold consensus rating on PTON stock based on three Buys, 12 Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. After a 71% rally in its share price over the past year, the average PTON price target of $9.17 per share implies 9.6% downside risk.
