DJ The Pandemic Keeps Shutting Gyms. That's Good for Peloton. -- Barrons.com
By Teresa Rivas
Peloton Interactive stock has jumped nearly 125% in 2020, and Wedbush argues that the at-home workout company will keep climbing as the pandemic pushes more people to turn to its products.
Analyst James Hardiman reiterated an Outperform rating on Peloton (ticker: PTON) and raised his price target by $3 to $66. The spread of Covid-19 has made the market Peloton can target far larger, he said.
The stock's big run recently means that expectations are high for its earnings report, due in early August, and that it could drop in response to news about gyms reopening, he warned.
Yet at the same time, there's reason to think that the company can deliver strong results. Judging by mentions on social media and Peloton's own metrics, engagement data in the past three months "were all through the roof, accelerating relative to the already-strong growth seen in the March quarter, and in each case reaching uncharted territory despite what would normally be a sequential decline in the June quarter as outdoor exercise opportunities become a viable option," Hardiman wrote.
Clearly, people are still sticking to indoor workouts despite summer weather. Hardiman is estimating that the company will deliver 126% year-over-year growth in subscribers when it reports, while the average estimate among analysts is for an increase of 108%.
Then there is the fact that a resurgence of coronavirus in some parts of the country mean that gyms are once again feeling the pinch. States are taking different approaches to the uptick in cases, and while the overall picture may show that slightly more gyms are open this month than last, Hardiman said he "can't help but believe the country is more skittish with regards to crowded gyms than a month ago."
That makes Peloton a more attractive option. Its position as the dominant player has only been magnified by the underwhelming rollout of the SoulCycle At-Home bike, Hardiman wrote.
Peloton was up 9.1% to $63.85 in afternoon trading. That leaves Hardiman's stock-price target a bit more than $2 above where the shares stand now.
The stock has risen so quickly that many bulls think that it can keep rising -- if not as fast. From the demand for its bikes, to the potential for its treadmill products and the minimal impact from gym reopenings, analysts have been quick to point out the continuing factors that could Peloton's rally going.
Still, some are hesitant about valuation. The company isn't expected to turn a profit this fiscal year or next.
Write to Teresa Rivas at teresa.rivas@barrons.com
(END) Dow Jones Newswires
July 20, 2020 13:59 ET (17:59 GMT)
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