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Why Peloton Interactive Is Rising Today

What happened

Shares of Peloton Interactive (NASDAQ: PTON) were jumping 5.5% higher in early morning trading Tuesday after a Stifel analyst raised his price target on the home fitness leader 13% to $62 from $55 per share.

A Cowen analyst followed suit this morning, raising his price target 30% to $70 from $54 per share.

Image source: Peloton Interactive.

So what

The price forecasts come because of how consumers are viewing fitness routines during the COVID-19 pandemic.

In a note to investors, Stifel analyst Scott Devitt wrote, "Shifting consumer behavior, gym closures, social-contact avoidance and steady demand from word-of-mouth have the potential to fuel multiple quarters of holiday-like demand."

He also believes it will accelerate Peloton's margin expansion potential by two to three years.

Now what

Peloton Interactive had closed on Monday at just about $53 a share, meaning Wall Street saw upside potential for the stock of between 17% and 32% because of what Stifel called "holiday-like demand" for its products.

While the connected fitness company makes pricey, high-end stationary bikes and treadmills, it also offers stand-alone streaming fitness classes that last month topped 1 million subscribers, about double the number it had a year ago.

With out-of-home gyms like 24 Hour Fitness filing for bankruptcy and closing locations, while others such as Planet Fitness (NYSE: PLNT) navigate how to do social distancing in their gyms, the simplicity of exercise in your living room is looking appealing to more people.

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Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Peloton Interactive and Planet Fitness. The Motley Fool has a disclosure policy.


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