Peloton Target Raised as JMP Sees Price Cut Luring More Users

(Bloomberg) -- Peloton Interactive Inc.'s price target was raised to $38 from $34 at JMP Securities, which reiterated its market outperform rating after the interactive exercise equipment maker cut prices Wednesday for digital-only subscriptions.

The cheaper subscription “broadens Peloton's reach, improves conversion, and reduces purchase friction,” analyst Ronald Josey told clients in a research note. The potential for accelerated adoption, along with the possibility of a lower-priced Tread and Rower, in addition to Peloton's 30-day free home trial, result in the company's product offerings being “well positioned to attract a greater customer base into its broader ecosystem.”

Josey views the decision to lower the digital subscription monthly fee and offer of a 30-day trial as “highly strategic.” The increased subscriber additions stemming from the initiatives should “more than offset lower monthly prices,” he said. Josey wouldn't be surprised if this change ultimately leads to increased revenue. The analyst projects digital subscribers will generate revenue of about $25 million for Peloton in fiscal 2020 and $35 million the year after.

Through Wednesday, shares of Peloton are up 14% since its initial public offering in late September. The stock rose 1.3% in pre-market trading on Thursday.

JMP's revised target implies upside of about 15% from Peloton's Wednesday close. The average price target for the stock is $33, according to data compiled by Bloomberg. Currently, the stock has 19 “buy” ratings, one “hold,” and zero “sells.”

To contact the reporter on this story: Janet Freund in New York at jfreund11@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Scott Schnipper

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