Shares of Peloton Interactive (NASDAQ: PTON) have surged by 16% after David Einhorn, billionaire, and hedge fund manager, called the stock undervalued at Robinhood’s (NASDAQ: HOOD) investor conference on October 23.
The announcement was made as the Greenlight Capital founder was riding a Peloton bike — previously, in June, the fund had disclosed a $6.8 million stake in the business.
The home fitness giant’s fall from an all-time high (ATH) of $162 during the pandemic was swift and unrelenting — following mismanagement, supply chain, and factory closures, the stock had lost as much as 97% of its previous value.
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At press time, Peloton stock is trading at $6.22 — having rallied by 16.27% after Einhorn’s bold claim. Over the last six months, PTON share price has increased by 88.36% — bringing year-to-date (YTD) returns up to 6.80%.
Peloton stock is seemingly recovering
The atmosphere surrounding the interactive workout platform is still quite grim — the fitness business faced a well-publicized boycott by UFC founder Dana White back in November of 2023, and in May of 2024, CEO Barry McCarthy stepped down as 15% of total staff was laid off.
Following these events, in August the company released a disappointing Q3 2024 earnings report — earnings per share (EPS) of negative $0.45 had turned out 15.38% worse than consensus estimates of negative $0.39.
In the interim, two board members — Karen Boone and Chris Bruzzo, are serving as co-CEOs, and have seemingly had some success with turning the venture around. The wellness brand beat analyst estimates in Q4 2024 — which was followed by a sudden 35% increase in stock price.
A day before Einhorn’s announcement, the exercise equipment maker had announced a partnership with Costco (NASDAQ: COST), which will see the company’s bikes sold in stores nationwide.
Wall Street analysts do not share Einhorn’s view
Einhorn’s stance on Peloton’s valuation isn’t entirely solitary — but it’s far from the norm. At present, 18 Wall Street equity researchers issue ratings for the stock. The outlook isn’t entirely bearish — there are 2 ‘Buy’ ratings and 1 ‘Sell’ rating — while 15 ‘Hold’ ratings dominate estimates.
The average price target set by these experts is currently $5.02 — which would represent a 19.29% downside from the stock price at the time of publication. It should be noted, however, that some analysts have set price targets as high as $10.
Notably, Einhorn did not provide either an exact or even rough estimate as to what he considers the fair value price of the company. While recovery is certainly possible, Peloton’s leadership issues would have to be resolved quickly — followed by a string of consecutive quarters showing strong results.
