Peloton Interactive (PTON, Financial) has drawn fresh attention from investors, with David Einhorn (Trades, Portfolio) of Greenlight Capital spotlighting what he sees as undervaluation in the stock. Einhorn points to Peloton's impressive subscriber metrics—riders who are not only highly engaged, averaging 13 rides a month, but who also show strong loyalty. Einhorn argues that this loyal user base supports a stable cash flow, which isn't yet reflected in Peloton's discounted valuation. His analysis suggests that if Peloton tightens up on cost controls and aligns its operations to boost margins, it could see a valuation closer to high-performing subscription companies in the digital fitness space.
Einhorn is eyeing potential catalysts beyond cost improvements. He notes Peloton's business model could attract larger companies, especially given its robust customer engagement and the strong recurring revenue from subscriptions. Moreover, the impending CEO transition could pave the way for new strategies that elevate Peloton's market position. For Einhorn, Peloton's valuation today represents an attractive entry point, especially as it remains well below comparable companies in its sector.
Morgan Stanley analysts, led by Nathan Feather, back this view, anticipating Peloton's renewed cost discipline will drive financial outperformance, with the firm suggesting that Peloton's FY25 cash flow guidance may be conservative. With the stock rallying 35% post the last earnings release and up nearly 10% since Einhorn's pitch, investor sentiment is bullish heading into the October 31 earnings report. Analysts are eyeing a forecast of $571.7 million in revenue and EPS of -$0.14 for Q1, expecting Peloton to hit or even exceed these targets.
