As 2023 comes to an end, analysts are releasing their predictions and stock picks for 2024. And while most experts remain overall lukewarm on pandemic-era favorite Peloton Interactive (PTON), there are a few bulls on Wall Street who expect this beaten-down growth stock to bounce back big in 2024 - and one superfan who thinks the stock could potentially triple from current levels.
Here's a closer look at what analysts expect from PTON heading into 2024.
About Peloton Interactive
Peloton is a New York-based exercise equipment company that designs, manufactures, and markets fitness products, such as treadmills, stationary bikes, and rowers. Additionally, it offers a digital fitness platform with a range of subscriptions, where more than 6.7 million users follow along with fitness lessons such as indoor cycling, indoor/outdoor running, yoga, meditation, and much more.
During the COVID-19 lockdown and restrictions, home fitness products such as Peloton gained traction among frustrated gym-goers. But as local gyms and fitness centers fully reopened, the company struggled. CEO Barry McCarthy, who took the top job in 2022, made some cost-cutting decisions - such as slashing the workforce in half, shifts in its manufacturing to offshore, and onboarding new sales partners such as Amazon (AMZN) and Dick’s Sporting Goods (DKS).
With only $748 million left in its cash reserves, the company will need to achieve profitability soon, and partnerships with names such as Lululemon Athletica (LULU), the NBA, and Liverpool FC, among others should help boost their brand in turn driving sales.
PTON Underperforms in 2023
Peloton shares have slumped 20% this year, though they're up 48% from October's 52-week low of $4.28.
In its Q1 2024 earnings report, Peloton reported wider-than-expected losses of $0.44 per share, although revenue of $595.5 million topped estimates.
Looking ahead, CEO Barry McCarthy called the company's bike rental service a “big growth opportunity” in his letter to shareholders, with revenue from this business segment projected to grow 90% year-over-year for FY 2024.
Wall Street's forecast for 2024 revenue is $2.75 billion, which is right at the midpoint of management's guidance range, and indicates an expected annual revenue decline of 1.92%. Analysts are expecting PTON to return to revenue growth in fiscal year 2025, with sales projected to rise 4.89% to $2.88 billion.
PTON is currently priced at about 0.8x forward sales, which is relatively cheap for a consumer discretionary stock.
What Do Analysts Expect for Peloton?
Peloton shares have underperformed this year, but most analysts don't think the shares look like a bargain just yet. The stock has a consensus “Hold” rating from Wall Street, down from “Moderate Buy” two months ago, now that a couple of bulls have thrown in the towel after earnings.
However, Brian Nagel of Oppenheimer - who has the Street-high price target of $20 - still has high hopes for PTON. "In our minds, still healthy existing consumer engagement represents a key positive for PTON and longer-term potential for the brand," the analyst wrote after fiscal Q1 results, while backing a “Buy” rating.
The mean price target for PTON is $8.16, indicating expected upside potential of 30.9% to current levels. By comparison, Oppenheimer's target implies expectations for PTON to more than triple over the next year.
Out of the 23 analysts currently covering the stock, 6 have a “Strong Buy” rating, 14 have a “Hold” rating, 1 has a “Moderate Sell” rating, and 2 have a “Strong Sell” rating.
