Despite same-day reports of a recall and patent infringement suit against the booming bike-maker, shares of Peloton nabbed a new all-time high on Thursday, and the latest–and most bullish call on the stock yet–indicates shares could go even higher.
While the broader market fell for a third-straight day, shares of Peloton climbed nearly 4%–closing the day at $136.43–the highest close ever for the e-bike giant.
The recent uptick comes after a flurry of analysts upped their Peloton price targets, including a new Street high price target of $150 per share issued by Bank of America on Thursday, representing nearly 11% growth potential.
Truist Securities Managing Director Youssef Squali also raised his Peloton price target, to $144 from $115, on Wednesday–following a survey, conducted by Truist, of 1,500 consumers that revealed promising prospects for Peloton.
More than half of respondents said they have either canceled or plan to cancel at least one gym membership as a result of the coronavirus pandemic, while 55% said they plan to exercise more frequently at home.
Truist said the findings, which also showed more consumers plan to work out at home more frequently even after the pandemic wanes, serve as a tailwind for Peloton that will continue “well beyond the pandemic as consumer habits permanently shift.”
Out of 24 analysts issuing a price target for Peloton, the average estimate based on current fundamentals is $116.33, and an overwhelming majority–more than 90%–have issued either a buy or strong buy rating on the stock.
“If half of these guys are telling you that they’re not necessarily going back to the gym–even after Covid, and these same people are telling you that they’re working out more at home and that they’re buying more fitness equipment, well, that all bodes pretty well for Peloton,” says Squali. “It’s the brand that comes most to mind.”
The new high for Peloton shares comes amid same-day reports that the firm issued a recall on pedals for about 27,000 bikes due to safety concerns, and that it was sued for patent infringement. This is at least the third time Peloton and Icon Health and Fitness, the firm alleging the patent infringement, have been in a legal tangle, and Squali notes that the recall only affects about 3% of the bikes Peloton has sold.
Wall Street’s most bearish Peloton outlook comes from BMO Capital analyst Simon Siegel, who raised his price target on the firm from $26 to $33 in September, while reiterating an underperform rating. At the time, he told investors in a research note he had concerns over whether Peloton could keep up with equipment sales and the coronavirus-driven boost through the end of the year.
Launched with the help of a crowdsourced Kickstarter campaign in 2013, Peloton went public on the Nasdaq exchange in September of last year and managed to keep its stock price afloat through an advertising gaffe and the start of the pandemic. Then, in May, the price started to explode in light of investor optimism that was validated with a blockbuster quarterly earnings report, which showed revenue surged 66% year over year to $526 million. Shares have more than quadrupled since the start of May after another surge in September, when the firm said quarterly revenue growth had once again surpassed expectations, climbing 172%.
What To Watch For
Gearing up for what’s likely to be the biggest holiday season for online shopping ever, Squali says the next few months could be “huge” for ecommerce-savvy Peloton (which sells directly to consumers), adding that December and January tend to be very strong for the firm even without the Covid-19 boost. Amplify ETFs CEO Christian Magoon made a similar point while speaking to CNBC on Monday, noting that Amplify’s Online Retail ETF, whose top 10 holdings are led by Peloton and also include Overstock, Carvana and StitchFix, has skyrocketed up 85% this year.
Here’s Why Peloton Stock Is Soaring 10% Today (Forbes)
Peloton Recalls Pedals On Nearly 30,000 Bikes After Reports Of Injuries (Forbes)
Peloton Stock Is Soaring. Analyst Says Gains From Pandemic Will Last. (Barron’s)