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In their upgrade note, the analysts explain that their formerly pessimistic view of the stock – BMO had kept PTON at “Underperform rating the past few year” – has been driven by a continuous mismatch between the upbeat narratives the management used to push, and the downbeat results the company actually delivered: “storytelling lifted shares as TAM tales painted a future more exciting than customer counts ever supported.”
While the analysts still fear “TAM will prove materially lower than management expectations and see risks (hence not Outperform),” they also see several “green-shots”:
Based on the above, the analysts believe “breakeven is within mgmt’s control” and conclude that “with PTON’s first negative Subscriber guidance behind us” at current low price levels the shares already reflect most concerns about the company, but assign less value to the positives: “Risk/Reward has shifted, even skewed upward at current levels.”
As such, BMO Capital Markets upgrades PTON to a “Market Perform” rating with $9.50 Price Target.
Shares of PTON are gaining over 4% in pre-market on Monday, trading just above $8.10. The stock is down 3.8% YTD.
