Peloton Sales to Contract Further - Credit Suisse

© Reuters Peloton (PTON) Sales to Contract Further - Credit Suisse

By Sam Boughedda

Peloton (NASDAQ:PTON) is set to report earnings next week, and with the company struggling since the pandemic, its shares have tumbled over 88% in the last 12 months.

Ahead of its earnings release, analysts at Evercore ISI and Credit Suisse released research notes previewing the report.

An Evercore ISI analyst maintained an In-line rating and $14 price target on Peloton, telling investors the firm previously lowered estimates on June 16th based on proprietary survey results, which implied soft demand trends.

"We view the Street’s FY’23 Revenue, Connected Fitness (CF) Subscriber and CF Net Additions estimates as aggressive, and we see some risk of downward estimates revision," explained the analyst. "That said, FY’23 EBITDA Street estimates could be revised up, after considering recent news around the company’s incremental cost saving initiatives (~800 job cuts across customer service and delivery as PTON outsources those services to third parties in the company’s move to shift from fixed cost to variable cost structure; Bike+ and Tread price increases, and potential store closures in 2023). Finally, based on intra-Q data points, we view the Street’s FQ4 (June quarter) estimate of 19K Net Additions as reasonable, and early signs for FQ1 (July trends) show very similar trends as the June quarter."

A Credit Suisse analyst kept a Neutral rating and raised the price target on Peloton shares to $13 from $12 per share.

"F23 guidance and a restructuring update is more important to us than F4Q results. In an uncertain macro environment with dampened discretionary spend, we think F23 sales contract further as the business searches for run-rate demand. Business model changes (leasing, licensing, logistics) will carry different economics, but we think the current selling model will drive results next year. For F23, we estimate 3.29m CF subs (300k net adds), $3.3bn sales (-5%), 37% GM (+1,075bp), and $-170m Adj. EBITDA vs. Street 3.40m/$3.6bn/38%GM/-$160m," wrote the analyst.

Peloton shares are down 3.5% Thursday.