Morgan Stanley moved Peloton to an Underweight rating from Equal Weight on Tuesday, arguing that longer-term shifts in consumer behavior will continue to weigh on the company's connected fitness subscriber base.
Analyst Nathan Feather lowered his price target to $4.50 from $5.00, which he said implies roughly a 16% downside from current levels. Alongside the price-target cut, Feather reduced his fiscal 2027 and 2028 projections. After the revisions, his fiscal 2028 revenue and EBITDA forecasts sit about 2% and 9% below consensus, respectively.
Feather pointed to a sharp narrowing of Peloton's top-of-funnel metrics. He reported that gross additions have fallen approximately 78% from their peak. Connected fitness subscriber growth declined 9% year over year in fiscal 2026, according to the analyst's notes.
The analyst attributed those trends to structural headwinds in the broader fitness landscape. He noted that Google search interest in strength training has increased at an 8% compound annual rate over the past decade and recently surpassed interest in cardio. At the same time, he cited an increase in gym membership penetration to 24% of the population, up from 20% in 2021.
Those developments run counter to Peloton's existing product positioning, which is centered on cardio-focused, at-home hardware and connected classes. Feather cautioned that consensus forecasts appear overly optimistic, pointing out that many models assume 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.
On valuation, Feather observed that Peloton trades at roughly 5 times EBITDA but argued that the multiple alone is insufficient to drive the stock higher. "Cheap is not a catalyst," he wrote, adding that many mature internet peers already trade at or below similar multiples.
Regarding product roadmap impact, Feather expects a sub-$2,000 treadmill release before the holidays but views that launch as only incremental to the business. He said broader new product categories are not expected until late 2027.
Reporting note: The analyst commentary and estimates above reflect the views attributed to Nathan Feather and the actions taken by Morgan Stanley as described in the firm's note.