Peloton Interactive (PTON) is facing a potential decline in gross subscriber additions in fiscal 2026 after the "disappointing" early traction of the company's new Cross Training Series hardware, Morgan Stanley said in a Friday note.

Morgan Stanley estimated that the company's fiscal Q2 gross adds declined by 24% year on year, with fiscal 2026 gross adds now expected to fall 20%. A flat subscriber growth appears unlikely unless Peloton Interactive can introduce a new "hit product," the investment firm noted.

According to the brokerage, the company's fiscal Q2 results was a "step back," given the revenue miss and the cut to the high-end of its fiscal 2026 revenue outlook. Morgan Stanley also attributed these to the new hardware's "worse-than-expected" sales to existing customers.

Morgan Stanley lowered its 2026 and 2027 revenue estimates for the company by 2% and 7%, respectively.

Morgan Stanley also cut its price target on Peloton Interactive to $5 from $6.50, while reiterating an equal-weight rating.

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