Peloton Stock soars as analysts scramble to raise price targets in wake of Precor deal
Yesterday, connected fitness company Interactive Platoon (NASDAQ: PTON) agreed to acquire rival fitness company Precor in a $ 420 million deal. In a press release, Peloton said it would reap many benefits from the agreement, including an industrial presence in the United States and increased research and development (R&D) capabilities, while also speeding up the passage of the company in the commercial fitness market.
Wall Street analysts rushed to adjust their target price models following the deal, raising Peloton’s shares by more than 13%.
Goldman Sachs analyst Heath Terry raised his price target from $ 144 to $ 162, arguing that the deal will diversify Peloton’s customer base and “strengthen the company’s lead in connected fitness.”
Wedbush analyst James Hardiman raised his price target from $ 130 to $ 160, noting that a “perpetual push” caused by the pandemic has left Peloton scrambling to meet demand. He went on to note that expanding manufacturing capacity will help address this issue.
Edward Yruma, analyst at KeyBanc Capital Markets, raised his price target from $ 160 to $ 185. He noted that Precor’s strong reputation in commercial fitness and the addition of its R&D team will help fuel Peloton’s future growth.
Dana Telsey of Telsey Advisory Group raised her price target from $ 145 to $ 180, citing shorter delivery times and the larger addressable market.
The big question shareholders need to ask themselves is “Does it really matter?” After all, investors are encouraged to ignore the daily machinations of the stock market, focusing instead on the long-term opportunities.
In this case, I think the analysts are correct. Strong secular tailwinds made it difficult for Peloton to keep up with demand. The acquisition of Precor helps the company increase production, while expanding its total addressable market to commercial gyms, as well as hotels, universities and multi-family residences.
This addition should serve Peloton and its investors in the future.
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