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Peloton well-positioned as awareness rises: Cowen survey

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Cowen analysts led by John Blackledge upgraded their price target on shares of Peloton, while maintaining their overweight rating, in part due to the results of survey which found rising awareness of the fitness brand, especially among younger cohorts. Meanwhile, Peloton announced that it set a record for most people streaming a single live class on its platform.

Video Transcript

MYLES UDLAND: It's time now for our final round call of the day. Today, we're talking about Cowen's latest note on shares of Peloton, a stock that we've talked about a couple of times recently. The firm has an outperformed rating and a price target of $37 per share.

And I think, Melody, it kind of comes back to the old question that we're going to have I think with the Zooms and the Pelotons. And we had it with Netflix. Their earnings out on Monday afternoon, which is, does this new normal really change the TAM for companies that, you, know, sure, there were a lot of tailwinds for Peloton. And obviously working out at home is hot right now. But does this change the trajectory for a company that I think had quite a few questions around where it could go longer term as recently as two months ago?

MELODY HAHM: And I think, Myles, even within the stay-at-home basket of stocks, they're all created differently, right? So in the Peloton's case, it's still a discretionary item. It's still for very high net worth individuals to think about this during this period of time during a pandemic, whereas, there are many folks who, perhaps, are not thinking about their physical fitness or what they could be doing instead of going to the gym.

I think this Cowen now is particularly interesting and different, perhaps, from some of the other commentary we've heard from analysts over the last couple of weeks, because they're focusing on a survey that they themselves have conducted to about 2,500 households and specifically focusing on the high growth area, which is that 18 to 24 year bracket.

One thing I want to point out, though, is there's the most household awareness among those 55 years and older. I think there's about 75% awareness there. But then Cowen is citing that growth in the college age student group saying that there's been a huge increase in awareness from Q4 of last year to the March survey that you just conducted. Think about the children of those people who are 55 years old.

Of course they're aware, perhaps, because their parents use it, because their parents talk about it, because their dad's talking about the commercial. And maybe they should buy their mom one for the holidays or a birthday present. So I think there's some kind of question here where, yes, just because young people are aware of it, it doesn't necessarily translate to purchasing power or necessarily that they would buy their own.

If anything, it's just more exposure. And per our prior discussions, I think this might be a little bit overstated. And we know that the era of total addressable market has come to somewhat of a close, I hope, just as a lot of these very inflated valuations are coming back down to earth.

DAN ROBERTS: Can I just add in there, guys? This is very funny to me discussing this now, because a week ago, we were discussing a different note. There was a downgrade of Peloton. It was from BMO to Capital Markets. And I won't say I told you so. But some of the points in that were to be concerned because of the hotness of Peloton right now.

A, the concern of a pull forward in demand if too many people are buying one now. And then you won't see people buying one later. And also the idea that Peloton was giving too much away for free, that, you know, it's actually a negative, maybe, that the free or lower-cost digital classes right now are so hot because people just stick with that. And then they won't feel the need to subscribe and pay for more.

And I found that a little hard to believe at the time, because I think it sounds like a good problem to have. If a lot of people are interested in a machine right now, and if they're dipping a toe to Peloton by doing the classes, that seems to me like a pretty good thing. And so among the different stay-at-home names, I think Peloton looks pretty good. And I'm inclined to agree with this note more so than the note a week ago.

JENNIFER ROGERS: And one of the things that I really liked in here was that part of the survey that they had where they sent out asking people how comfortable they would feel returning to blank after they are officially reopened. And at the top of that list was retail stores. So people thought, OK, I'll go back to a retail store, so I don't have to buy everything online.

Restaurant and bar. OK, churches, schools. Down their next, it's gyms. Or just gyms are just right before airlines. So there's going to be some weariness or wariness they think about going back to the gym. You might go to a mall, right, and go shop or go to a restaurant before you want to go work out. And that can make this trend, at least, for Peloton a little bit longer.

MYLES UDLAND: And and on that point, Jen, what is your ranking of these? I'm thinking about this now, as you're talking through this, because personally I guess like an idiot, I would be more comfortable going to gym than a lot of these other places. But I actually think airlines are probably safer than a restaurant. But that's just my take.

JENNIFER ROGERS: Yeah, it's funny, like, I kind of would put the airlines above there if I went-- you know, you've been seeing these pictures of people. And they've just put masks on and on for United flight attendants and everyone on the plane. I feel like I could do the airline. I would wipe it all down. I'm with them. A bottom one here is concert venue. And I see that. And I think that also goes to sports as well. That plays into live nations. I mean, there's lots of stuff that I can see why that one's last.