Peloton climbs on Wall Street upgrade as analysts cheer the company’s sticky subscriber base
Deutsche Bank says Peloton’s business looks more like Spotify or Netflix than the consumer discretionary bucket it’s usually lumped in with.
Shares of Peloton climbed nearly 4% Monday after Deutsche Bank upgraded the stock from “hold” to “buy,” pointing to the strength of its high-margin subscription business. The firm also trimmed its price target to $6.60 from $8.60, citing ongoing weakness in equipment sales.
Even with the hardware hurdles, analysts called out Peloton’s “industry-leading” customer loyalty as a key reason behind the upgrade, with over 90% of its gross profit now coming from subscriptions.
They also noted the app’s affordability (Peloton App One is $12.99 per month, and Peloton App+ is $24 per month) and its convenience compared to more expensive in-person options.
“Peloton shares are being unjustly punished and being lumped into consumer discretionary bucket, when its earnings algorithm should be more akin to defensive subscriptions like Spotify and Netflix,” analysts wrote Monday. “Put simply, fitness as a category should be defensive and Peloton's subscription is an affordable and convenient option relative to physical gyms.”
According to analysts polled by FactSet, nearly a third of the coverage now rates Peloton’s stock as a “buy,” the most positive sentiment since July 2023.
Still, the company faces a rocky road ahead: Deutsche Bank also highlighted supply chain pressures from recent tariff hikes, adding that up to 75% of Peloton’s parts come from Taiwan. Meanwhile, with the company’s bikes and treadmills priced up to $3,000, analysts say Peloton has little room to hike prices and will likely have to absorb rising costs.
Peloton shares are up over 78% over the past year.
