Morgan Stanley cuts Peloton rating on structural fitness headwinds

Investing.com -- Morgan Stanley downgraded Peloton to Underweight from Equal Weight on Tuesday, warning that a consumer shift toward strength training and gyms will keep pressure on the connected fitness company's subscriber base.

Analyst Nathan Feather cut his price target to $4.50 from $5.00, implying about 16% downside, and lowered his fiscal 2027 and 2028 estimates. He now sits 2% and 9% below consensus on fiscal 2028 revenue and EBITDA, respectively.

Feather said Peloton's top of funnel has narrowed sharply, with gross additions down about 78% from their peak and connected fitness subscriber growth falling 9% year over year in fiscal 2026.

He attributed the weakness to structural headwinds, noting that Google search interest in strength training has grown at an 8% compound annual rate over the past decade and recently overtook cardio, while 24% of the population now holds a gym membership, up from 20% in 2021.

Those trends run counter to Peloton's cardio-first, at-home machines, the analyst said. He argued consensus forecasts are too bullish, modeling a return to roughly flat subscriber growth within three years.

"Consensus is modeling a stark inflection in gross adds which we believe is highly unlikely," Feather wrote.

While Peloton trades at about 5 times EBITDA, Feather believes the valuation alone is not enough to lift the shares.

"Cheap is not a catalyst," he wrote, noting many mature internet peers trade at or below that level. He expects a sub-$2,000 treadmill launch before the holidays to be only incremental, with new product categories not due until late 2027.

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