Latest Developments:
Peloton (PTON) reported Q1 2025 revenues of $586 million, down 1.68% year-on-year. While subscriptions grew, hardware sales declined sharply. The company posted positive operating income for the first time since Q4 2020, but net losses improved only marginally. Peloton’s cost-cutting restructuring is on track to save $200 million annually, but revenue continues to deteriorate, and the company expects a further decline in Q2 2025.

Investment Case:
Despite restructuring efforts, Peloton's revenue continues to shrink, especially from hardware sales. While software initiatives like Strength+ and new features may drive future growth, they haven't yet translated to substantial revenue. With a high debt-to-equity ratio and continued negative revenue growth, Peloton's stock appears overvalued. Our valuation suggests a potential downside, with a target price of $9.14, indicating a 4% downside from its current level.

Valuation:
Based on comparable company analysis and Peloton's projected FY2025 adjusted EBITDA of $265 million, our valuation model suggests the stock is overvalued at its current price of $9.52. At best, the stock should be priced closer to $9.14.

Disclaimer: The above is an excerpt on a report written by our close associate, Selendis Research. Interested parties may check out the full report here on Seeking Alpha. All information provided is intended solely for general informational purposes. Seven Insights does not take into account individual financial goals or situations and does not provide personalized investment advice. Seven Insights is not a licensed securities dealer, broker, U.S. investment adviser, or investment bank.