Morgan Stanley Downgrades Peloton
Morgan Stanley downgraded Peloton Interactive Inc. (NASDAQ: PTON) to Underweight from Equal Weight on Tuesday, citing structural headwinds in the connected‑fitness market.
Analyst Nathan Feather reduced his price target from $5.00 to $4.50, implying roughly a 16% downside. He also lowered Peloton’s fiscal 2027 and fiscal 2028 revenue and EBITDA estimates, now sitting 2% and 9% below the consensus forecasts for fiscal 2028.
Feather highlighted that Peloton’s top‑of‑funnel has narrowed sharply: gross subscriber additions are down about 78% from their historical peak, and connected‑fitness subscriber growth fell 9% year‑over‑year in fiscal 2026. He attributed the weakness to a broader consumer shift toward strength training and gym memberships. Google search interest in strength training has grown at an 8% compound annual rate over the past decade and has recently overtaken cardio‑related searches. Gym membership penetration has risen to 24% of the population, up from 20% in 2021, a trend that runs counter to Peloton’s cardio‑first, at‑home equipment strategy.
Feather argued that consensus forecasts are overly optimistic, modeling a return to roughly flat subscriber growth within three years, which he deems unlikely. Despite Peloton trading at approximately five times EBITDA, he cautioned that the valuation alone is insufficient to act as a catalyst, noting that many mature internet peers trade at similar or lower multiples.
Regarding product pipeline, Feather expects a sub‑$2,000 treadmill to launch before the holiday season, but views it as only incremental to revenue. He anticipates that new product categories will not be introduced until late 2027.