A number of Wall Street firms have raised their price targets on Peloton Interactive Inc. in recent weeks amid signs that fitness enthusiasts are discovering, and embracing, its interactive exercise equipment and classes as a replacement for shuttered gyms.

The first signal arrived with the report on May 6 that showed Peloton’s revenues in the third quarter ended March 31 climbed 66 percent. Total members grew from 2.0 million in Q2 to 2.6 million in Q320, a 30 percent quarter-over-quarter increase. In early March, the company announced it was extending the free trial period from 30 to 90 days for digital subscriptions not tied to the company bike or treadmill hardware in light of COVID-19.

On May 12 in an 8K regulatory filing, Peloton said that it had surpassed 1 million subscribers for its connected fitness digital offerings after ending the first quarter with 833,100.

Peloton’s stock has had a rocky ride since going public in September 2019 at $29 a share, even losing 11.2 percent on its first day of trading. Shares have surged this year, however, on the expected benefit from shelter-at-home mandates. The stock closed Wednesday at $41.07 after starting the year at $28.40, representing a gain of 44.6 percent.

Oppenheimer Lifts Price Target On Peloton To $50 From $46
On May 27, Oppenheimer reiterated its “Outperform” rating on Peloton and raised its price target to $50 from $46, pointing in part to online traffic data that could signal better-than-expected subscriber growth.

“Broad-based shelter-in-place mandates, extended gym closures and gym reopening rules have pushed consumers toward connected fitness home solutions with PTON being a direct beneficiary,” wrote Jason Helfstein, the lead analyst, in a note.

Helfstein said the May 12-filing indicating that the 1 million milestone had been passed indicates that Peloton will likely surpass its guidance for connected fitness subscribers for Q420, despite supply chain delays.

He also sees upsides to forecasts for Q121 connected fitness subscribers due in part to strong overall web traffic. Per SimilarWeb data, significant strength in traffic is also heading to Peloton’s Support domain, which the analyst believes highly correlates to in-period conversion. Finally, recent fulfillment window extensions from two-to-four weeks to eight-to-ten weeks was seen as another signal of robust demand.

Helfstein noted that Pelton’s management is investing heavily in supply chain capabilities to reduce backlog challenges ahead of holiday selling. The analyst also noted that Peloton officials earlier this month publicly reconfirmed plans to launch a lower-priced bike that would significantly expand its addressable market.

SunTrust Robinson Humphrey Raises Peloton Price Target To $60 From $52
On May 19, SunTrust Robinson Humphrey analyst Youssef Squali reiterated his “Buy” rating and raised his price target to $60 from $52.

Squali argued both the company’s outlook and Wall Street’s estimates for connected fitness subscribers are still too conservative. He also pointed to app data from SensorTower that implied strong growth for Peloton’s mobile app in terms of daily downloads. He also noted Google searches for “Peloton” and “Peloton bike” showed a sudden uptick in mid-March that hasn’t yet petered off.

“We believe the pandemic has accelerated underlying offline to online trends in the fitness industry as people were forced to adapt to a new environment,” he wrote. “The speed and magnitude of this trend were seen in Peloton’s earnings report.”

Squali also noted that Peloton’s management believes the effects of the pandemic have increased its addressable market beyond the 14 million cited around the time it went public as the appeal to under $75,000 household income and under 35 year old demographics continue to grow.  Further, the analyst expects the lower-priced bike and the introduction of new product such as a rower should significantly widen Peloton’s addressable market over time.

Another positive from the pandemic for Peloton has been the closure of traditional gyms and boutiques sparking greater interest in at-home fitness. Said Squali, “We believe Peloton’s standing as a brand, that’s become synonymous with the category, has allowed it to gain a lion share of the benefit. This leading position has been built by years of brand campaigns that has fueled the success of the word of mouth referrals driving sales this quarter.”

JMP Securities Raises Peloton’s Price Target To $59 From $53
On May 13, JMP Securities again raised its projections on Peloton, reiterated its “Market Outperform” rating and lifted its price target to $59 from $53.

The change came after Peloton’s May 12 disclosure that it had surpassed 1 million connected fitness subscribers arrived significantly faster than JMP had expected, reinforcing the investment firm’s view that consumer fitness behavior is fundamentally changing due to COVID-19.

Ronald Josey, JMP’s lead analyst, said the company is benefiting from strong word of mouth. He wrote, “Simply put, we believe Peloton’s high-quality Content, growing Community and Convenience factor — which we call Peloton’s “Three Cs” — are significantly differentiated, and its addressable market is expanding as Home Trial and financing make the service more affordable.”

Josey noted that users aged 35-and-younger now account for 30 percent of Peloton’s sales, up from 20 percent a year ago, and households with income under $100,000 now account for half of year-to-date sales. JMP also remains optimistic that delivery should return to more normalized levels by late summer and a lower-priced Tread can be launched by the end of the calendar year.

Photo courtesy Peloton