Is Pelotons share price good value as it targets the wellness market?
P elotons [PTON] share price has raced away with a 50% gain since 6 May (as of 29 June), signalling that a May sell-off appears overdone. Back in May, Pelotons share price hit $82.62 having been on a downward spiral since 8 April, when it was trading around the $124.50 level. Catalysts for Pelotons plunging share price are well documented  a fault with the Peloton Tread led to a tragic accident, followed by a clumsy response from Peloton, leading to a PR disaster and eventual product recall. The hit to Pelotons share price  a near 30% decline  was hefty. However, the resulting sell-off looks to have opened up a buying opportunity for the company. As a result, Pelotons share price looks like it could be well-positioned to take advantage of the growing corporate wellness market. Peloton has benefited from the coronavirus pandemic driving up demand for at-home exercise. In Pelotons fiscal third-quarter earnings, gross profit came in at $444.9m, up 81% year-on-year. Revenue came in at $1.26bn for the quarter, up 141% from the same period last year. Subscription gross profit came in at $154.5m in the quarter, up 172% year-on-year, reflecting a boom in app downloads and closed gyms. Promisingly, net losses shrank to $8.6m, down from the $55.6m seen in the same period last year. Workouts on its Connected Fitness and Digital platforms jumped to 171 million, up from 48 million workouts in the same period last year. $1.26billion Peloton's fiscal Q3 revenue - a 141% YoY rise  Despite the strong results, Peloton expects the impact of recalled treadmills and stalled the release of a cheaper model to reduce fourth-quarter sales by $165m, guiding for a total haul of $915m. Still, the strong results have given some analysts confidence that Pelotons share price future is bright. In June, Loop Capital started coverage of Peloton, with analyst Daniel Adam pinning a $140 price target on the stock and telling investors that the product recall was weighing more on Pelotons share price than it really should. PTON shares are down ~40% from the January highs, in large part due to the companys voluntary recalls of the Tread and Tread+ and negative press around the safety of those products. Although we fully expect some impact from the recalls, we believe the impact will be short-lived and that managements guidance likely bakes in an excessive amount of conservatism, wrote Adam in a note to investors. Although we fully expect some impact from the recalls, we believe the impact will be short-lived and that managements guidance likely bakes in an excessive amount of conservatism - analyst Daniel Adam  The analyst also noted that Peloton had delivered upside at the midpoint of guidance each and every quarter, with an average quarterly revenue beat of +11%. Credit Suisse which had initiated coverage on Peloton with an outperform rating in April, tweaked its target in May, moving from $164 to $152  a still bullish 21.6% upside on Tuesdays close. Analysts tracking Pelotons share price on Yahoo Finance, say the stock carries an average $130 price target  a more muted 4% upside on Tuesdays close. Peloton targets corporate wellness trend  Writing for Opto, Global X research analyst Andrew Little argues that the total addressable market for fitness is now bigger than ever, driven by an expansion in at-home fitness. Little pointed to a TD Ameritrade survey that showed 87% of Americans plan to continue working out at home after the pandemic, while in a separate survey 59% said they didnt plan to return to the gym. In our view, the fitness industry will become a hybrid of traditional brick-and-mortar and at-home models. We expect that this will partially be consumer-driven as convenience, reduced health risks, and synergies with disruptive technologies and consumer trends like wearables reinforce the staying power of at-home fitness, Little wrote. In our view, the fitness industry will become a hybrid of traditional brick-and-mortar and at-home models. We expect that this will partially be consumer-driven as convenience, reduced health risks, and synergies with disruptive technologies and consumer trends like wearables reinforce the staying power of at-home fitness - Global X research analyst Andrew Little  Whereas before the pandemic, companies would offer staff discounts at bricks and mortar gyms, now they are offering discounts for at-home online fitness, with Peloton looking for a piece of the action. Pelotons new Corporate Wellness platform will provide employees of participating businesses discounted Digital and All Access memberships, among other benefits. Launched at the end of June, the service is available in the US, UK, Canada and Germany, with Australia being added later in the year. Companies already signed up to the service include Wayfair [W], Samsung [005930] and Sky. The new service is the natural extension for us to be able to scale our offering, William Lynch, Pelotons president, said in a statement. How Pelotons corporate platform answers that question, could be key in driving Pelotons share price growth over the next few years.