UBS analysts Arpine Kocharyan and Robin Farley upgraded Peloton (PTON, Financial) from Sell to Neutral citing expectations of improved earnings before interest, taxes, depreciation, and amortization (EBITDA) through further cost-cutting measures and a performance-based alignment of CEO compensation. Early trading Friday following the upgrade found shares rising over 8%. UBS expects a slowdown in subscriber growth to force Peloton to maximize expenses even more. From $216 million to $298 million analysts projected FY25 EBITDA; from $277 million to $376 million for FY27. Operating expenses—including $50 million from sales and marketing, $15 million from contractor spending and supply chain changes, and $10 million from IT and software—are projected to be targeted for cost cuts.
These are on top of other cuts announced earlier totaling $100 million from a 15% personnel decrease. These steps notwithstanding, Peloton's future growth is yet unknown. Higher subscription costs and deteriorating user metrics—including a 5% drop in unique site visitors in October and a 19% year-over-year decline in monthly active users for the same month—cause UBS to flag the risk of stagnation over the next two years. Reflecting changed valuation criteria and recent stock performance, UBS set Peloton's price target at $10.
