Neha Gupta
2 min read
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On May 27, Citi analyst Ronald Josey cut Peloton Interactive, Inc.’s (NASDAQ:PTON) price target to $8.50 from $10 and maintained a Neutral rating on the stock.
The adjustment comes on the exercise equipment company delivering mixed third-quarter fiscal 2025 results. While sales fell 13.1% year-over-year to $624 million, they beat analysts’ estimates of $621.5 million. The company posted adjusted earnings of $89.4 million, better than the expected $80.37 million.
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Josey’s Neutral stance also comes on Peloton lifting its revenue guidance for the year to $2.46 billion. The new revenue guidance reflects the expectation of favorable subscription revenue driven by higher paid connected fitness subscription management. It also expects EBITDA of $340 million, below analyst estimates of $345 million, as the free cash flow margin is expected to improve to 15.2% from 1.2% last year.
Citi also remains optimistic about Peloton's prospects on churn rates declining by 0.2% to 1.2%. The improvement comes from customers reacting positively to new product offerings such as Strength modalities. In addition, the company is benefiting from the new CEO's strategic objective, which focuses on accelerating growth and cutting costs.
Peloton remains focused on acquiring new members cost-effectively, as depicted by advertising and marketing spending decreasing 46% year-over-year in fiscal Q3. The company expects Ending Paid Connected Fitness Subscriptions to range between 2.77 and 2.79 million in FY25, reflecting a ten thousand increase at the midpoint.
Peloton Interactive, Inc. provides Members with world-class equipment, ground-breaking software, expert human instruction, and the world’s most supportive fitness community. It offers connected fitness products, including Peloton Bike, Peloton Bike+, Peloton Tread, Peloton Tread+, Peloton Guide, and Peloton Row names through e-commerce and inside sales, retail showrooms.
While we acknowledge the potential of Peloton Interactive, Inc. (NASDAQ:PTON) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than PTON and that has 100x upside potential, check out our report about the cheapest AI stock.
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Disclosure: None.
