over 3 years ago • 2 mins
Investment bank Goldman Sachs broke away from the pack this week, posting a price target for controversial “tech” stock Peloton that suggests its 100% rise in 2020 could have further to run… 🚴♀️
The luxury exercise equipment maker – which also offers standalone workout app subscriptions – initially had a bumpy ride after launching on the stock market last September. But things have shifted up a gear since the coronavirus led to widespread gym closures and enforced staying-in: Peloton’s last earnings update in May revealed better-than-expected revenue rises and plans to diversify the company’s product range.
While some investors worry that Peloton’s high percentage of monthly rather than annual subscribers leaves it vulnerable to fitness freaks returning to their gyms, Goldman Sachs is a firm fan. In new research published on Monday, the bank pointed to twice-average wait times for exercise bikes and increasing “network effects” as evidence of sustained demand – and for accelerating subscriber growth projections.
As the table above shows, Goldman expects revenue to pick up this year and beyond – even if, as with all good fast-growing tech companies, profitability (as shown by EPS or “earnings per share”) is likely to remain elusive. Crucially, however, it also raised its 12-month price target for Peloton’s shares from $66 to $84 – the highest of any investment bank out there 😯
Peloton’s stock price rose 10% on Monday before retracing 3% on Tuesday; after all, rival bank UBS was considerably less optimistic in its own update on the company last week. Yet if Goldman turns out to be right, things could have much further to go – another 50%, to be precise.
That’s despite the fact Peloton shares have already more than doubled in price since pessimistic research from a noted short seller in December suggested they’d end 2020 at $5. Goldman also acknowledges the risks to its forecasts: a limited number of potential customers, increasing competition from the likes of Equinox and Lululemon, and subscriber churn 😬
Nevertheless, Peloton remains out in front as the “connected fitness” leader for now, with subscriber turnover currently below 1% monthly and customer acquisition cost efficiency improving. August 5th’s next set of quarterly earnings should signal whether Goldman’s confidence looks justified…
Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.