According to the Smart Finance APP, Bank of America upgraded the rating of fitness equipment manufacturer Peloton (PTON.US) from 'underperform' to 'buy', with a target price of $9.

Bank of America analyst Curtis Nagle and his team believe that Peloton's EBITDA this year is expected to exceed $0.3 billion, with a potential to exceed $0.4 billion in the coming years. Under the leadership of the new CEO, Peloton may further cut operating expenses, increase hardware profit margins, and raise subscription prices.

Nagle emphasized: "Despite revenue trends still facing challenges, Peloton's profit story is convincing and there is ample room for growth." He added, "Due to Peloton's operating costs being significantly higher than the industry average, continued cost reductions could result in significant cost savings."

In terms of the balance sheet, with a significant increase in free cash flow, debt maturity extended to 2029, Peloton is expected to shift from a cash-burning state to a deleveraging status. Peloton's current cash position is $0.722 billion, which is seen as capable of repaying debt and supporting valuation.

Peloton announced last week the appointment of Ford Motor (F.US) executive Peter Stern as the next CEO and President, effective January 1, 2025. Stern is currently the President of Ford's Comprehensive Services Division and previously served as Vice President at Apple (AAPL.US).

As of the publication, Peloton surged 6.07% in pre-market trading to $7.69. The stock has accumulated a 19% increase year to date, lagging behind the S&P 500 index. Short positions in Peloton's stock account for 16.4% of total outstanding shares.