Shares of Peloton Interactive (PTON 18.20%), the streaming fitness and equipment company, jumped 14.6% through 11:30 a.m. ET Wednesday after UBS analyst Arpine Kocharyan upgraded the stock to buy with an $11 price target.

That's nearly twice where Peloton stock closed last night.

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Why UBS loves Peloton

UBS sees Peloton making progress cutting costs and growing revenue, resulting in higher expectations for fiscal 2026 profits. Granted, that might not happen, but UBS sees the stock as offering a "favorable risk/reward [ratio] and undemanding valuation" at its present price -- and cash flow is already improving.

All of this leads the analyst to predict that Peloton might guide investors to higher 2026 profit than Wall Street is expecting. Kocharyan's best guess is that Peloton might guide to $400 million or even $450 million in 2026 earnings before interest, taxes, depreciation, and amortization (EBITDA) -- as much as a 25% earnings surprise.

Is Peloton stock a buy?

Now mind you, we're talking about EBITDA here, a rather spongy term and not actual net profit, much less real free cash flow (FCF) that goes into the bank.

Still, Peloton has resumed generating positive free cash flow, and most analysts agree Peloton will remain FCF-positive this year and, indeed, for the foreseeable future. Valued on the $245 million in cash profit the company will probably generate this year, the stock only costs about 11.5 times current year FCF, which I agree is an "undemanding valuation," so long as Peloton can grow as UBS predicts.

Even with $1.1 billion in net debt on the books, the price looks right for this one. I agree: Peloton stock is probably a buy.