Peloton Stock Forecast

Peloton Stock Forecast: Is PTON Stock a Buy?

Another company that was once a FinTwit darling. It’s funny how quickly out of favor a company can fall after a couple of bad earnings reports. Peloton rose to popularity on a solid business premise: an exclusive, high-end product with recurring subscription revenues and a strong brand.

Sounds a lot like a SaaS company. The only difference is, rather than a low cost software program, Peloton makes fitness machines that can cost upwards of several thousand dollars per model. 

There seems to be one other factor at play when we talk about Peloton’s meteoric rise as a company: much of its growth came during the COVID-19 pandemic. Peloton bulls will argue against that notion, but the fact is that at the height of Peloton’s popularity, gyms were widely closed and the world was mired in a global pandemic that kept us shut up indoors. 

Shares of Peloton have fallen off a cliff this year, with the stock down over 62% year to date. This article will dive into everything investors need to know about the Peloton Stock Forecast.

Peloton Stock Forecast: Recalls and Re-openings

In its recent earnings call, Peloton stated that the company had underestimated the reopening impact on its business and lowered guidance for the rest of the year. As could be expected, shares fell 25% that day. It was just the latest in a series of black eyes that Peloton has experienced this year.

The negative outlook for the rest of 2021 aligns with the ever important holiday season for retail companies. With sales of Peloton machines already on the decline, the bearish forecast left little for investors to be cheerful for.

What’s worse, the company has been burning through its cash reserves on growth initiatives like marketing, product enhancements, and product line expansions. The result is that less and less money is coming in compared to how much Peloton is spending. 

Capital Raising To Remove Some Pressure

It’s not all bad news though. Shares rebounded by 15% following the announcement of a massive stock offering by the company. Peloton is set to raise $1.07 billion for its balance sheet by selling 23.9 million shares at a price of $46.00 per share.

Peloton stated that the capital raised could go towards aggressive moves like acquisitions, investments in new technology, and expansion of existing production capacity. 

Baird analyst Jonathan Komp argued that the company’s capital raise removes “a significant near-term overhang” that has applied pressure to PTON stock since Q1 2021. Komp remains upbeat on PTON stock, with a $90 price target implying a 125% upside.

PTON Stock Outlook 2022

It’s hard to feel confident in a company when it is burning cash at such a high rate, while also seeing dwindling sales numbers and decline in overall demand. Peloton is now trading at a reasonable price to sales ratio of 3.6, and its recent stock offering has attracted some sharp institutional investors.

Peloton still has a strong brand and reliable subscription revenues for its interactive classes. But the company really hasn’t shown how it can maintain this strong brand and remain relevant, especially as the world slowly begins to reopen from the pandemic.

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The content above is strictly for informational purposes only and is not financial advice nor does it constitute a recommendation. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you. 

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