Peloton soars on analysis from veteran Wall Street trader

Quotes on Peloton Interactive, a maker of fitness equipment and media content, gained 8% yesterday, April 22, after Wall Street veteran Stephen Guilfoyle claimed that the company’s balance sheet “is not nearly as weak as many may believe.”

Yesterday, Peloton advanced 8% to close at $5.75 per share before climbing another 3% in after-hours trading. The day before, on April 21, Stephen Guilfoyle, a floor trader on the New York Stock Exchange for over 30 years, published an analysis of the company on TheStreet Pro.

“This is easy to forget with firms like this, but Peloton's balance sheet is not nearly as weak as many may believe,” Guilfoyle wrote. As of the end of the fourth quarter, Peloton had $829 million in cash and $1.308 billion in current assets. Current liabilities stood at $634.7 million, and the company had virtually no short-term debt. Guilfoyle believes this gives Peloton a headline current ratio of a robust 2.06 and a current ratio of 1.65.

He also pointed out that the company has posted positive free cash flow for four consecutive quarters, which indicates that Peloton can meet its financial obligations. According to the company’s most recent earnings report, total liabilities less equity stood at $2.607 billion, including $1.489 billion in long-term debt. In his view, this is not an emergency, as all of the debt is long-term, although “At some point, this debt will have to be worked on.”

Peloton stock is down 33% year to date but still up 88% over the last 12 months. The company is expected to release its next earnings report on May 1, and analysts have already started sharing their projections.

Nathan Feather of Morgan Stanley has slashed his target price on Peloton from $5.75 to $4.00 per share while reiterating an “equal weight” rating, equivalent to a “hold.”

Despite being quite upbeat on the name, Guilfoyle also trimmed his target price from $10.00 to $8.25 per share.

Bank of America analyst Curtis Nagle has lowered his target price from $11.50 to $9.50 per share but maintained a “buy” rating on the stock.

UBS has reiterated its “neutral” call with a target price of $7.50 per share. According to Investing.com, UBS expects Trump’s “reciprocal” tariffs on China to have an immaterial effect on Peloton’s costs. JMP Securities has also maintained its “neutral” rating, with a more optimistic outlook pending data on subscriber growth.

Citizens JMP has likewise kept a “neutral” rating on the stock. It has called attention to monetization strategies, such as a possible subscription price increase. The JMP analyst highlighted Peloton’s potential expansion into new sectors such as nutrition but emphasized that greater clarity on subscriber growth acceleration is needed to upgrade the stock.

Only Canaccord Genuity has upgraded Peloton from “hold” to “buy,” setting a target price of $10 per share. This upgrade reflects optimism about the company’s strategic efforts to improve its cost structure and unit economics.

Peloton Interactive is a U.S. exercise equipment and media company based in New York. It makes stationary bikes, treadmills, and rowing machines equipped with Internet-connected touch screens that stream fitness classes through a subscription service.

During the pandemic, Peloton experienced explosive growth, with sales surging 172%. However, after the pandemic, demand plummeted, which was accompanied by a slowdown in subscriber growth and an inventory build-up, with a net loss of more than $1.2 billion for the quarter ended June 30, 2022.

Since then, Peloton has been fighting to stay afloat, undertaking a major restructuring that included mass layoffs and management changes.

Guilfoyle has served as the chief market economist at Stuart Frankel & Co., an economist at Meridian Equity Partners, and a vice president in block trading and investment banking at Credit Suisse. He earned his nickname “Sarge” for serving as an actual sergeant in the U.S. army reserve while also working on Wall Street. This is where his family-run trading operation, Sarge986 LLC, gets its name.