New Peloton Price Target as Wall Street Revises its Outlook

I have spent the first half of December catching the "Stocks Under $10" crowd up on my thoughts regarding most of our "SU$10" names. 

Due to the fact that a couple of these names have had outstanding Decembers to date, and have needed attention on more than one morning, I still have to get to a couple of names. Thanks to the fact that for December, Planet Labs (PL)  is up 53.3%, Rocket Labs (RKLB)  is up 45.9%, Ondas Holdings (ONDS)  is up 10.8% and Palantir (PLTR)  is up 9%, that has taken some of the pressure off of a few of my underperforming SU$10 names.

I haven't even gotten to Peloton Interactive (PTON)  and Ramaco Resources (METC) in December, nor for quite a while to be honest. I will try to get to these this week if something more important does not jump out from the screen first. In fact, let's go Peloton right now. 

This one bothers me a little because there had been an honest effort by former CEO Barry McCarthy to clean up the balance sheet as much as possible and also to refocus the business.

Current CEO Peter Stern, who has been on the job for almost a year now, is a former Apple (AAPL)  executive known for his expertise in subscription services. Stern also brings plenty of experience in executing a triangular integration between hardware, software and content. Hence, while not ready to surrender, I do feel that the firm's progress has stalled since McCarthy left.

Earnings

In early November, Peloton released the firm's fiscal first quarter financial results. The firm posted a GAAP EPS of $0.03. That beat Wall Street's expectations by two cents per share. The firm generated revenue of $550.8 million for the quarter, amounted to a year-over-year contraction of 6%, but still beating consensus. Operating expenses contracted 16.8% to $242.4 million for that period. This left GAAP operating income of $41.3 million, up from the year-ago comparison of just $12.3 million. After accounting for interest, other income and expenses and taxes, GAAP net income improved to $13.9 million from a net loss of $900,000 for the year-ago comp.

Fiscal second quarter results are due in early February. Wall Street sees a GAP EPS of -$0.06 on revenue of roughly $675.2 million. That would be close to the midpoint of the firm's previously issued revenue guidance of $675 million to $685 million. A print like that would be good for year-over-year growth of 0.2%. The firm has experienced year-over-year revenue contraction for five consecutive quarters and for 15 of the past 16 quarters. Of the 12 sell-side analysts that cover PTON, five have revised their earnings estimates lower since the start of the quarter while three have revised those estimates higher. Q1 estimates and full year 2026 estimates remain on track for profitability.

The Chart​

Incredibly, this chart has not changed all that much since ​I showed it to you in early November. The main difference is that the falling-wedge pattern of bullish reversal has been extended for six weeks. Oh, and the share price is down about $0.30 over that time.

Very interestingly, the stock has tried to retake its 21-day EMA for four consecutive sessions, while also trying to break out of the upper trendline of the wedge. This could get the swing crowd interested in this name, which would be a positive. 

Relative strength remains sub-neutral. The daily MACD is improving. The histogram of the nine-day EMA has moved into positive territory while the 12-day EMA has crossed over the 26-day EMA. While that is also a positive, the bullishness of the signal would be amplified if those two lines could move themselves above the zero-bound. Though the 21-day EMA is a pivot here, the 200-day SMA would be "the" pivot.

Target Price: $9.00 (down from $9.50)

Pivot: 200-day SMA (currently $7.00)

Add: On take and hold of 21-day EMA 

Panic: Loss of the May low ($5.82)

At the time of publication, Guilfoyle was long PL, RKLB, ONDS, PLTR, PTON and METC equity.