Insights

Why Peloton Stock Tumbled This Week

What happened

Peloton Interactive (NASDAQ: PTON), a stock that was performing poorly even before the overall market turned sharply downward, has fared just as badly this week. According to data provided by S&P Global Market Intelligence, Peloton lost another 10% in value this week. 

So what

In a terrible week for the market generally, consumer discretionary stocks were particularly hard hit. Macroeconomic fears were largely behind this, as many investors worry that inflation will cause consumers to pull back sharply on nonessential items. A Peloton bike might be a convenient way to exercise in one’s home, but it’s hardly necessary for survival.

Compounding that, late in the week the company’s stock was hit with an aggressive price-target cut. The cutter was Evercore ISI analyst Shweta Khajuria, who reduced her Peloton price target by 30%; it’s now $14 per share, well down from the previous $20. However, she is maintaining her hold recommendation on the stock.

Khajuria’s move derives from her new 2023 and 2024 estimates for revenue and earnings before interest, taxes, depreciation and amortization (EBITDA). These were reduced on the basis of survey results and industry data indicating that consumer demand will soften, hurting Peloton’s crucial subscriber growth.

Now what

Khajuria also said that, according to the findings of Evercore’s survey, only 9% of respondents are very likely to buy home exercise equipment over the next year. That’s a worryingly low figure for Peloton, and it adds to the already-struggling company’s various woes.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Peloton Interactive. The Motley Fool has a disclosure policy.

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