Peloton stock price has suffered a harsh reversal in the past few months as concerns about its growth continued. PTON was trading at $6.95 on Friday, down by 36% from its highest level in January last year. So, what next for Peloton share price?
Peloton Interactive is facing major challenges
Peloton, a company that sought to disrupt the fitness industry, has come under pressure in the past few years as its growth has slowed and competition has jumped.
Its annual and quarterly sales have retreated, while the number of connected fitness products and subscriptions have plunged over the years.
The most recent numbers showed that its connected fitness products revenue dropped by 21% to $253 million. Similarly, the total subscription revenue retreated from $424.5 million to $420.6 million.
More data showed that the number of ending paid app subscriptions dropped from 0.718k to 0.57k. The average monthly paid app subscription churn stood at 6.4%.
On the positive side, the company has continued to narrow its losses. Its net loss improved to $54 million from the $154 million it lost a year earlier. It also moved from a free cash outflow of $37.2 million to $106 million.
Another positive is that the company has continued to deleverage by reducing its total debt by $190 million and its net debt falling by 30% to about $281.4 million. Peloton Interactive also boosted its forward guidance for its adjusted EBITDA to between $300 million and $350 million. It expects its free cash flow to at least $200 million.
Read more: Peloton stock more than doubles in 2 months: is the growth sustainable?
Is PTON a good investment?
Peloton Interactive’s business is stabilizing, a trend that may continue in the coming year. Wall Street analysts expect the company’s quarterly results to be $620.3 million, down by about 13.5% from the same period las year.
The slowdown will next stabilize in the next quarter, with its revenue falling by 9.35% to $583 million. For the year, Peloton Interactive’s revenue is expected to drop by 8.8% to $2.46 billion. The slowdown will then narrow slightly to $2.45 billion if the recovery trajectory continues.
Wall Street analysts have a Peloton stock forecast of $9.96, much higher than the current $6.96. Some of the most bullish analysts are from Canaccord Genuity, who moved it from hold to buy. JMP Securities moved it to market outperform.
Still, the company faces major risks ahead. The biggest risk is that sales of its equipment will continue slowing in the coming years. Also, it has a monthly churn of over 6%, which is substantially higher than many companies in the subscription business.
Peloton stock price analysis
PTON stock chart | Source: TradingView
The PTON stock price also faces some technical risks. The chart above shows that it has formed a descending triangle pattern, a popular bearish sign. It has also remained below the 50-week moving average.
Therefore, the stock will likely continue falling, with the next point to watch being at $2.56, the lower side of the triangle pattern. The bearish view will become invalid if it rises above the descending trendline.
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