Peloton will leap another 14% as new products open the door to 5 million potential subscribers, BofA says

• $4 growing product lineup and stay-at-home trends stand to lift shares well into 2021, $4 analysts said Thursday.
• The team led by Justin Post raised their price target on the stock to $150 from $116, implying a 14% rally from Wednesday's close over the next 12 months.
• The company's upcoming treadmill addresses a market two to three times larger than the exercise bike market, Bank of America said.
• Couple Peloton Tread with a low-cost bike option coming later next year, and the company can expand its subscriber potential to 25 million from 20 million, according to the team.
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$4 upcoming treadmill and lower-priced bike options will play a critical role in lifting shares through 2021, analysts at $4 said Thursday.

The exercise hardware company's shares leaped 65% over the last month as investors increasingly bet on stay-at-home trends to linger. Bank of America is similarly bullish. Analysts led by Justin Post raised their price target for Peloton to $150 from $116 in a note to clients, implying a 14% rally from Wednesday's close over the next 12 months.

Delivery delay data gathered this month suggests sales continue to track well above their pre-pandemic levels, according to the bank. The order backlog signals a strong quarter ahead, and the opening of a new factory in December can potentially double Peloton's output. Couple the increased production capacity with an expanded lineup and Peloton is poised to keep its robust stock momentum in the months ahead, Bank of America said.

"With rising COVID cases worldwide, we think elevated health concerns and new product launches could drive strong holiday demand and continued upside to Street estimates," the team said.

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Bank of America maintains a "buy" rating on Peloton stock. The company has 41 "buy" ratings, three "hold" ratings, and one "sell" rating from Wall Street analysts.

Investors will see the first major boost arrive in the first quarter of 2021 when Peloton is slated to release its first treadmill. The market for such hardware is between two and three times as large as the exercise bike market, setting up the company to rapidly expand its total addressable market, Bank of America said.

A refurbished bike could launch later next year and attract lower-income households previously priced out of Peloton's lineup, the analysts added. The introduction of both new products can lift the size of Peloton's addressable market to 25 million from 20 million, according to the note.

The resurgence of COVID-19 cases throughout the US also curbs one of the biggest risks to Peloton's valuation: gym reopenings. A revival of physical gyms would cut into Peloton's addressable market, as its lower-cost options are still priced significantly higher than budget gym memberships.

The company's metrics could also be artificially inflated by pandemic-specific trends, the analysts said. Should recovery accelerate and those boosters subside, shares would likely take a more bearish trajectory.

Peloton traded at $134.60 per share as of 2:50 p.m. ET, up 388% year-to-date.

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