Peloton will rally another 18% as profits trounce expectations over next year, Bank of America says
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.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.Bernstein breaks down why value investing is not dead - and shares its 3-part strategy for buying cheap stocks before they break out higher
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.
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