On Friday, JPMorgan revised its stance on Peloton Interactive (NASDAQ:), downgrading the stock from Overweight to Neutral and adjusting the price target to $5.00, down from the previous $7.00.

This move comes despite Peloton delivering positive adjusted EBITDA and free cash flow for the second consecutive quarter and despite expectations of delivering over $200 million in annualized cost savings through fiscal 2025, driven by restructuring efforts and more efficient media spending.

The connected fitness company’s improved profit comes amid year-on-year declines in the industry, although these are reportedly moderating.

The current economic situation continues to impact consumer demand and Peloton’s focus on profitability has led to a more conservative revenue forecast for fiscal year 2025.

This outlook takes into account expected declines in hardware sales, broader macroeconomic challenges, a reduction in marketing spend, and an increase in the monthly churn rate year-over-year.

Despite these headwinds, JPMorgan acknowledged the company’s successful debt restructuring and ongoing cost-cutting measures. The firm also recognized Peloton’s strong brand presence and the value of its subscriber base, which has a churn rate of less than 2% per month.

Nevertheless, the analyst cited the significant increase in the share price of 35 percent on Thursday as the reason for the rating change, compared to the decline of 1 percent.

The company expressed skepticism about Peloton’s growth trajectory in connected fitness subscriptions and revenue given prevailing industry and economic pressures.

In other recent news, Peloton Interactive reported its financial results for the fiscal year ending June 30, 2024. The company stressed that it would focus on improving margins, although it expected a 9% year-over-year decline in both subscribers and revenue.

Needham highlighted Peloton’s efforts to streamline operations and achieve $200 million in savings by the end of fiscal year 2025 and maintained a hold rating on the company.

BMO Capital also maintained its Market Perform rating, recognizing Peloton’s strategic shift toward profitability rather than revenue growth. The company said this approach could be beneficial if implemented with urgency, given the current downward trend in subscription revenue and the increase in customer revenue. Meanwhile, TD Cowen maintained its Hold rating and forecast a slight year-over-year decline in Connected Fitness subscriptions.

Peloton recently completed a major refinancing plan, securing $1.35 billion through new credit facilities and private offerings, including a five-year, $1 billion term loan, an upsized private offering of $350 million aggregate principal amount of convertible senior notes due 2029, and a new five-year, $100 million revolving credit facility with JP Morgan and Goldman Sachs.

Analysts such as Telsey Advisory Group, Wolfe Research and JMP Securities maintained their neutral ratings on Peloton, focusing on the company’s operational changes, cost discipline and potential growth challenges. These developments indicate Peloton’s continued efforts to overcome its financial and operational challenges.

This article was created with the help of AI and reviewed by an editor. For more information, see our Terms and Conditions.