Goldman Sachs (NYSE:GS) has updated its stance on Peloton Interactive (NASDAQ: NASDAQ:PTON), raising the price target to $4.50 from the previous $3.50, while maintaining a Neutral rating on the stock. The adjustment follows Peloton's fourth fiscal quarter 2024 earnings report, which highlighted several key points including ongoing subdued demand in the market and challenges with the company's market strategy that are impacting subscriber growth. Despite these headwinds, Peloton has shown notable improvements in margins and free cash flow (FCF) generation.
The company's management has provided guidance for fiscal year 2025, anticipating adjusted EBITDA to be between $200-250 million and FCF to exceed $75 million. These projections are part of a broader cost restructuring plan aimed to achieve $200 million in annualized cost savings by fiscal year 2025.
Goldman Sachs noted Peloton's progress in cost management and the recent May refinancing of its balance sheet as positive steps towards stabilizing the company's financials.
However, Goldman Sachs pointed out that Peloton is still in a period of transition with unanswered questions regarding its long-term strategy. This includes the development of connected fitness products, mobile applications, distribution, and methods for customer acquisition and retention.
The firm anticipates that the appointment of a permanent CEO, expected by the next quarterly earnings report, will shed more light on the company's direction.
In other recent news, Peloton Interactive's fourth-quarter results surpassed expectations, with revenues and adjusted EBITDA exceeding forecasts by approximately 2% and 32%, respectively. Deutsche Bank (ETR:DBKGn), Citi, and Telsey Advisory Group have all raised their price targets for Peloton, indicating confidence in the company's financial performance.
Peloton's operational strategies have been geared towards achieving $200 million in annual cost savings by FY25, with a focus on improving profitability over growth. This includes refining its go-to-market strategy, particularly for its app, and allowing for gradual investments in product development and customer retention.
Despite these positive developments, JPMorgan (NYSE:JPM) downgraded Peloton's stock from Overweight to Neutral, citing the company's conservative revenue outlook for FY25, which takes into account expected declines in hardware sales and broader macroeconomic challenges. However, BMO Capital and Needham maintained their Market Perform and Hold ratings on Peloton, acknowledging the company's strategic shift towards profitability and its successful debt refinancing and cost savings program.
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