AP Photo/Jeff Chiu
Buy the dip in Peloton's shares as future sales will be "delayed, not lost" due to treadmill recalls, says Credit Suisse.
On Wednesday, Peloton shares plummeted as much as 15% after the company announced it would voluntarily recall two versions of its treadmills (the Tread and the Tread+) amid reports of injuries and one death. More than $84 million of Peloton changed hands Wednesday, the second highest trading volume on record for the stock according to Yahoo Finance data.
Credit Suisse estimates that about 131,000 units in the US and Canada will be impacted by the recall.
Peloton is now down over 45% year-to-date, and Credit Suisse analysts led by Kaumil Gajrawala see a buying opportunity present.
They forecast that future sales of Peloton's treadmills will be delayed due to the recall, but not lost entirely. The lower priced treadmill, named the "Tread," was set to launch in North America on May 27, but it remains to be seen how the recall will affect the launch date.
"Tread went on sale in the UK at the end of December with sales 'exceeding expectations," Credit Suisse added. "We think future sales will be delayed, not lost."
Peloton's vertical integration is also ideal for dealing with software updates and manufacturing changes, said the analysts. As part of Peloton's treadmill response, it will be automatically installing software that locks the Tread + treadmill after use and requires a pin.
The analysts have an "outperform" rating and $164 price target for Peloton. That's a roughly 98% upside from Wednesday's closing price.
Credit Suisse noted that risks to the price target include slowing demand, supply chain difficulties, elevated churn, and adverse litigation judgements.
Peloton was down an additional 3% in early morning trading Thursday.
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