Peloton will rally another 18% as profits trounce expectations over next year, Bank of America says
- Peloton's stock surge through the summer will continue into 2021 due to healthy demand, new products, and increased factory capacity, Bank of America analysts said in a Tuesday note.
- The team lifted its
price targetfor Pelotonshares to $101 from $72, implying an 18% jump from Tuesday's closing price.
- The updated target follows a 14% leap in Tuesday trading after Peloton unveiled two new products and lowered the price of its original exercise bike.
- Though valuation risk could bite into the rally, "elevated health concerns and new product launches could drive strong holiday demand and continued upside to street expectations," the analysts said.
- Watch Peloton trade live here.
Analysts Justin Post and Joanna Zhao raised their price target for Peloton shares to $101 from $72 in a note, implying the company will jump another 18% over the next year. The firm reiterated its "buy" rating and also lifted expectations for future earnings.
Peloton spiked as much as 14% higher on Tuesday after revealing two new products and cutting the price of its original exercise bike by $350. The updated lineup will help Peloton outperform through the end of 2020 and beat sales estimates next year, the bank's analysts said.
"While expectations and valuation risk are elevated ... we think elevated health concerns and new product launches could drive strong holiday demand and continued upside to street expectations," they wrote in a note.
The team expects Peloton's Thursday earnings report to meet revenue estimates of roughly $580 million. Fiscal fourth-quarter profit will arrive above the $67 million consensus estimate at $80 million, the firm added.
The team's models also point to Peloton meeting "full capacity" in the current quarter. Bank of America expects the company's fiscal first-quarter figures to handily beat expectations for sales and earnings, with a "still significant backlog" of orders point to sturdy demand.
That strength will carry on through fiscal 2021 due to a new factory lifting capacity and healthy subscriber growth, the team added. Fiscal year profits will hit $129 million, according to the bank, just shy of Wall Street's $131 estimate. Revenue over the year will fare better, totaling $2.8 billion versus the consensus estimate of $2.72 billion.
Peloton traded at $87.86 per share as of 12:30 p.m. ET Wednesday, up roughly 217% year-to-date.
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