Peloton Interactive (PTON), mcap=$3bn, price $8.84 vs $11.40

PTON pitch:
– Peloton short thesis has played out with stock 50% below IPO levels and down from the $162 covid peak.
– There is a lot of value from changed management with the focus finally shifting from growth to profitability.
– Gross margins were temporarily depressed and marketing spending was limited due to elevated COGS from 2021-2022 bike orders.
– Hardware GMs are expected to return to closed pre-covid levels of 25%-40%, generating sufficient cash to fund premium subscriber growth.
– TAM is much bigger than bears think with $PTON expected to dominate the premium end of the market.
– Lots of value in a cheap Peloton App with a number of ways to monetize it.

PTON valuation:
– With 10.5m subs at various ARPU levels ($44 to $11) set to generate $6bn in sales at 17.5% EBITDA margin by 2027.
– This results in $1.7 EPS.

Exp. gain: Not specified.

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