Peloton Interactive Inc (NASDAQ:PTON) shares added almost 8% to about $10.40 after the stock was upgraded to ‘Neutral’ from ‘Sell’ by analysts at UBS.
They also raised their price target on the stock to $10 from $2.50.
Analysts see earnings before interest, taxes, depreciation and amortization (EBITDA) benefitting from additional cost-cutting beyond the announced $200 million, mostly driven by reduced operating expenses (opex).
“It sounds as if opex could have room for further optimization, and we note that the full $200 million plus of run-rate cost saves this year will annualize in fiscal 2026,” they wrote in a note to clients.
“Peloton has fully reached payroll-related savings as of Q1, also finding savings in media spend that were not part of the original $200 million plus target.”
They also pointed to expectations being reset to little to no growth over the next two years and the CEO transition offering a chance to further reset the bar against buy-side expectations.
The new CEO can also achieve early successes with low-hanging fruit growth initiatives such as increasing subscription pricing, analysts added.
“We also like that CEO compensation package is tied to revenue/operating income and EBITDA/free cash flow performance,” they wrote.
UBS wrote that they are not more positive on the stock because they believe valuation is demanding at these levels amid an uncertain growth outlook.
“While we see subscription price increase as a relatively easy way to drive near-term 2% to 3% top-line growth, stock rerating could be held back by more challenging subscriber net additions, driving further opex reductions,” they wrote.