Peloton (PTON) stock fell 6.3% yesterday, bringing its YTD loss to 35.2%. The stock is now down nearly 45% from the 52 week highs and is not far from the 52 week lows of $ 80.48.
2020 has been a good year for so-called “home” stocks like Peloton and it has jumped during the year. 2021 has been a different ball game, however, and the stock has looked weak for most of the year. What is the forecast for the PTON stock and should you buy the downside?
Why did the Peloton share drop
The fall in Peloton shares can be attributed to both macroeconomic and company-specific factors. There was a massive sell-off of all home inventory as the economy for the most part reopened. This has resulted in lower sales growth for most home product inventories. Names like Zoom Video Communications and Amazon that benefited from lockdowns last year have looked weak this year.
Peloton’s product recalls didn’t help the stock either. After two recalls, the company admitted to touchscreen issues in the bike and the tread. In its last quarter, it recorded revenue growth of 54%. However, in the current quarter, he expects revenue to fall to $ 800 million from $ 937 million in the previous quarter.
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In addition, in the fourth fiscal quarter, its average monthly fiscal year per connected customer fell to 19.9 from 24.7 in the corresponding period last year. Like many other growth companies, PTON is also recording losses and in the fiscal fourth quarter it reported a loss of Adjusted EBITDA of $ 45.1 million with a margin of -4.8%. For fiscal 2022, the company gave a revenue forecast of $ 5.4 billion but expects to post an adjusted EBITDA loss of $ 325 million, which would mean a margin of -6. %.
The COVID-19 pandemic has helped drive demand for home fitness businesses like Peloton. In his earnings release, he said that “the past year has been an inflection point for the connected fitness industry, with a significant increase in awareness and demand following the onset of the COVID pandemic- 19. “
Recent developments in the peloton’s stock
From the home fitness market, Peloton is now also diversifying into the commercial market. Earlier this year, he acquired Precor and now integrates both companies to target the hospitality industry. Brad Olson, Peloton Commercial Director, said, “We have been selling Peloton bikes in hotels and resorts for years. … But this is really the highlight and one of the big parts of the logic of the deal that we bought Precor for.
He added: “We know that [having] our bikes in hotels and resorts around the world provide an excellent opportunity to introduce generations of prospects to the Peloton product and content. “
PTON stock forecast
Despite the recent collapse and the recalls, most Wall Street analysts have a bullish view of the Peloton stock. Of the 31 analysts polled by CNN Business, 23 see it as a buy while six see it as a hold. Two analysts have a sell or equivalent rating on the PTON stock.
Peloton received a median target price of $ 135, which is a potential increase of 42.8% from current prices. Its high street price target is $ 185, which is a 95.6% premium over current prices.
Peloton share price target
Lately, analysts have had mixed views on PTON stock. Earlier this week, UBS reiterated Peloton stock as a sell off. “We don’t see the launch of private label apparel as a tangible driver of subscriber growth – a key driver that drives EV’s multiples and sales measurement framework for PTON – but a company Significant and well-executed private label could enhance brand awareness and promote a sense of community and increase the level of secondary engagement, ”he said in his memo.
Last month, Citi launched a cover on the title with a neutral rating. While it seemed optimistic about the business model and the long-term growth potential of home gyms, he expressed concern about the short-term growth amid the reopening of gyms.
Long-term forecast of PTON stock
The long-term outlook for home fitness equipment companies like Peloton looks positive. While 2020 growth rates may not be sustainable, the industry is expected to experience secular growth in the long run. PTON is also building a plant in the United States to support demand. The company faced supply chain issues and a factory in the United States would help resolve the issues.
Meanwhile, competition is also intensifying and competitors like Beachbody are offering home gym products at a lower price. Peloton’s image as a premium brand has taken a hit amid recalls. The company should regain credibility in the medium term. Wall Street analysts expect the company’s revenue to grow 33.3% in fiscal 2022 and 29% in fiscal 2023.
Valuation and technical analysis of Peloton shares
PTON stock is currently trading at an EV (enterprise value over revenue) multiple NTM (next 12 months) of 5.3x. The multiples have averaged 6.3x since the company was listed. They hit a 2.4x low during the March 2020 market close and peaked at 11.4x earlier this year.
While valuation multiples have fallen, the company’s growth prospects also appear weaker than six months ago. Recalls have also wreaked havoc on multiples. That said, after the recent crash, PTON stock looks like a good buy.
Looking at the charts, however, the PTON stock looks bearish. It trades below the 50-day, 100-day, and 200-day SMA (simple moving average). The 200-day SMA was key resistance for the stock and it failed to break through the price channel. The MACD (Convergence Divergence Moving Average) also gives a sell signal. However, the 14-day RSI (Relative Strength Index) of 35.3 is a neutral indicator.
Should I buy PTON shares?
If you’re bullish on the home fitness market, PTON is among the best stocks to play in history. This looks like a good stock to buy after the recent weakness and should offer good returns in the medium to long term.