Mackenzie Tatananni

Shares of Peloton Interactive have gotten a lift on the heels of a strong earnings report, and one analyst believes the stock can rise even higher.

Goldman Sachs analyst Eric Sheridan upgraded shares of the fitness equipment maker to Buy from Hold, and lifted the target price to $11.50 from $7, in a note Friday.

Shares ended the session up 11% at $7.86, with Sheridan's price suggesting potential 46% upside. The benchmark S&P 500 and Nasdaq Composite rose 0.8% and 1%, respectively.

The rerating came after Peloton swung to a surprise profit in the fiscal fourth quarter, and issued fiscal 2026 guidance that was well ahead of both Goldman's and the Street's expectations, Sheridan noted.

The analyst cited management's positive commentary on initiatives such as the expansion of offerings beyond fitness -- often seen as the cornerstone of Peloton's business -- and into areas such as sleep, recovery, and mental well-being.

The company alluded to several go-to-market strategies that are likely to ramp in the coming year, including the rollout of several-hundred-square-foot "micro stores" across the country while simultaneously downsizing large retail showrooms.

"Going forward, investors receiving more finite details of how these strategies will be deployed and then executed against...will likely be an element that could build investor confidence," Sheridan wrote.

However, there were some blemishes in the report. Management noted that revenue are expected to decline in the first quarter of fiscal 2026, "driven by a continued decrease in hardware sales, in part due to seasonality trends," Sheridan wrote.

Tariff uncertainty continues to linger, with management forecasting a roughly $65 million impact to free cash flow as a result of exposure to the higher levies. That's not to mention a lack of clarity into trends in fiscal 2026, with management no longer providing guidance for connected fitness subscriber growth.

Sheridan, for one, is prepared to take the risk. He anticipates a return to total revenue growth in the middle of fiscal 2026, which could land Peloton in a "solid revision cycle" for the next 12 to 18 months.

The company's work on the cost base and capital structure is best evidenced in its free-cash-flow guidance, the analyst added. (Management forecasts "at least $200 million" in fiscal 2026.) Sheridan believes this is another metric with the potential for compounded growth beyond 2026.

All in all, Peloton is positioned to be a success story, with "new initiatives aimed at platform growth and monetization for the next few years and a scope for higher incremental returns on capital in the form of free cash flow conversion," Sheridan wrote.

He believes the company's strategic announcements address a wider societal shift toward health and wellness, with Peloton preparing to scale an array of products to match the changing attitudes of consumers in years to come.

While the stock certainly has fans on Wall Street, it's a mixed bag. Of 21 analysts polled by FactSet, 11 rate Peloton stock at Buy or the equivalent. Nine rate it at Hold, and one has a Sell rating.

Peloton appears to be in the throes of a turnaround strategy. CEO Peter Kern said on Thursday that the company was launching a cost-restructuring initiative, intending to achieve at least $100 million of run-rate savings by the end of fiscal 2026.

In an accompanying announcement, Peloton said it would be cutting jobs and trimming indirect spending. Investors took that news in stride, seeing it as perhaps a sign that the company was asserting control, and possibly is on pace for a recovery after years of underperformance after the pandemic boom.

In May 2024, shares traded for as little as $2.70, down from a record trading high of $171.09 set in January 2021.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com

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August 08, 2025 16:23 ET (20:23 GMT)

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