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Peloton has expanded its membership options as part of a turnaround strategy.
Scott Heins/Getty Images
Peloton Interactive was dropping Wednesday after analysts at Wolfe Research lowered their rating on the stock, saying they are skeptical about the fitness equipment company’s ability to reach long-term profitability.
Peloton
(ticker: PTON) has been looking to implement a turnaround strategy based on new digital membership options and price changes, but Wolfe’s Zach Morrissey argued the company still faces the fundamental problem that demand is falling now that the Covid-19 pandemic has ended. People rushed to buy exercise bikes and other gear while gyms were closed, but that surge of demand has faded away.
“We believe the COVID pull forward of demand could persist for some time and combined with weakening consumer spending trends and higher churn—we see increasing risk of further negative net [subscriber] adds in the future,” Morrissey wrote.
The company didn’t immediately respond to a request for comment.
The analyst downgraded Wolfe’s rating on Peloton to Underperform from Peer Perform and assigned a target price of $6 to the stock. Peloton shares were down nearly 8% to $7.64.
While Morrissey accepts that Peloton’s new digital app plans could attract some “incremental users” by offering cheaper prices, he said there was still potential for future subscriber declines and that the company doesn’t appear to have significant pricing power.
“The company has made material progress improving its cost structure and liquidity runway recently. However, we are cautious on the ability of recent initiatives to reaccelerate growth in a profitable way,” Morrissey wrote.
Write to Adam Clark at [email protected]
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