With Peloton, “Patience required”. Deutsche Bank begins purchase hedging. – .

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With Peloton, “Patience required”. Deutsche Bank begins purchase hedging. – .



Interactive Platoon
were down on Friday even after Deutsche Bank launched an equity hedge at Buy despite its recent drops.

In addition to the buy note, analyst Chris Woronka set a price target of $ 76, which implies an almost 80% rise from the closing share price on December 1 of 42, $ 25.

“While it’s never fun to start a buying relationship with some sort of ‘patience required’ asterisk, that’s exactly what we end up doing here,” Woronka wrote.

The manufacturer of the exercise bike (ticker:

PTON
) became a darling stock in 2020 when the coronavirus pandemic boosted sales of home exercise equipment. It has since fallen out of favor with the Wall Street bulls as the company grapples with manufacturing issues and people have returned to gyms.

Peloton stock fell 4% to $ 42.63 on Friday. Stocks have lost around 71% this year.

The disappointing third quarter results sent the stock into a downward spiral in November, pushing it to its lowest levels since July 2020 and prompting a series of price target cuts. Peloton reported a net loss of $ 376 million, or $ 1.25 per share, in its most recent quarter, performing worse than Wall Street’s expected loss of $ 1.10 per share.

Peloton now expects to end fiscal 2022 with 3.35 to 3.45 million fitness subscribers connected, down from previous forecast of 3.63 million. Its revenue outlook for the year ranges from $ 4.4 billion to $ 4.8 billion, down from a previous forecast of $ 5.4 billion.

Of the 31 analysts covering the stock, 16 rated it a buy, 12 a hold and two a sell.

In its note, Woronka noted that the market views fitness stocks as an “either / or” sector – people either go back to gyms full-time or continue to train at home.

“It’s a simplistic view of the world; we believe that the hybrid work model extends to fitness as well, and that PTON has a lot of momentum to be found operationally, ”he said.

Woronka dismisses fears that the home fitness trend is just a ‘fad’, highlighting Peloton’s strong growth trajectory before the first case of Covid is reported.

While investors have been spooked by declining sales volumes for the company’s flagship bicycle and the recent recall of its Tread Plus machine, Woronka sees several benefits over the coming year. Peloton’s new, cheaper tread pattern could overtake Bike units within a few quarters, he said. He also predicts that the company’s subscription revenue will grow rapidly by 2024.

He also described other growth opportunities for the company, such as exploiting the corporate fitness market and expanding into international markets to keep growing.

The brand also has a cult-like cult that it could tap into to “expand the content platform to new, adjacent mediums that don’t necessarily fit perfectly into the traditional fitness bucket,” wrote Woronka. Peloton’s churn rate is extremely low, hovering below 1% for all periods disclosed by the company since 2019.

“We think that if indeed the title can recover for fundamental reasons, it has a lot of leeway,” he said.

Write to Sabrina Escobar at [email protected]

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