Peloton raised to Outperform at Macquarie following Q3 earnings

Investing.com -- In a note to clients on Tuesday, Macquarie upgraded Peloton (NASDAQ:PTON) to Outperform from Neutral and raised its price target to $10 from $9 after a stronger-than-expected fiscal third quarter and an improved full-year outlook.

“Another quarter ahead of guidance and market expectations on sustained margin focus and better user numbers,” Macquarie wrote, pointing to Peloton’s continued turnaround progress.

Third-quarter revenue reached $624 million, hitting the high end of guidance, while ending paid subscribers of 2.88 million topped the company’s forecast. Gross margin improved 370 basis points sequentially to 51%, beating the 50% guide. 

Adjusted EBITDA came in at $89.4 million, above Peloton’s $70–$85 million range and well ahead of consensus. Free cash flow of $94.7 million also beat expectations.

Guidance for fiscal 2025 was adjusted across key metrics. Peloton now expects adjusted EBITDA of $330 million to $350 million (up from $300 million to $350 million), revenue of $2.455 billion to $2.470 billion, and free cash flow of about $250 million, even after factoring in a $5 million tariff-related hit in the fourth quarter.

Ending paid subscribers are now forecast between 2.77 million and 2.79 million.

Macquarie noted that the beat and guide imply “a ~24% 4Q EBITDA hike (midpoints),” despite seasonal softness and some consumer weakness seen early in the quarter. 

They believe refurbished equipment and a higher-income user base could provide support.

“~50% TSR to market close on 12 May supports upgrade to OP,” the firm wrote, highlighting better earnings, reduced leverage, and consistent execution under new management.