(Bloomberg) -- Peloton Interactive Inc.’s longest bull is moving to the sidelines after the fitness company’s record post-earnings surge.
JPMorgan Chase & Co. analyst Douglas Anmuth — who had maintained an overweight rating on the stock since initiating coverage in 2019 — downgraded the stock to neutral after shares of the New York City-based company soared as much as 41% on Thursday.
The jump came after Peloton reported earnings that beat analysts’ estimates, signaling to investors that its turnaround efforts, which are sharply focused on profitability, are starting to yield results.
Anmuth said that although the beleaguered fitness company’s earnings are improving, there are headwinds from macro pressures, and that a return to revenue growth remains challenging.
The analyst was Peloton’s longest-standing bull on Wall Street. He stuck to his call even as shares of the company tumbled almost 80% since his initial rating. Peloton was an investor darling in the early days of the pandemic as consumers clamored for its stationary bikes and fitness classes during the lockdowns. But as people returned to gyms, the company’s revenues fell, sending its shares into a tailspin.
Peloton has made several attempts to reset its business, and the latest attempt has left what had been a throng of once-bullish analysts cautious. There are now just two, from Roth MKM and Oppenheimer & Co. Inc, with buy-equivalent ratings, while 18 others have moved to hold. Three have the stock with a sell-equivalent recommendation.
Even after Thursday’s rally, Peloton shares are down 97% since their 2021 peak. But one-day surge burned short sellers who flocked to the stock during 2024’s swoon. They were hit with $83 million in paper losses and saw all gains notched in August evaporate, according to data from S3 Partners LLC.
It might have been a grim day of traders betting against the stock, but investors and analysts welcomed the company’s focus on profitability. While most analysts were positive, some of Anmuth’s peers joined him in flagging their concerns. Shares of the company rose 6.4% on Friday, hitting their highest level since Jan. 31.
BMO Capital Markets analyst Simeon Siegel, who was one of the early skeptics on the stock, lauded the company’s new approach of cutting costs and reducing losses, but added that “urgency matters given shrinking subscription revenues/growing churn.”
“If today marked the beginning of change, we see material upside,” Siegel wrote in a research note. “If not, we fear a melting ice cube.”
--With assistance from Katrina Compoli and Carmen Reinicke.
(Updates stock moves in sixth and seventh paragraphs.)
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