Peloton risk/reward skewed positively, recall fears overdone says BMO Capital

BMO Capital analysts said the Peloton (NASDAQ:) recall fears are overdone, and the risk/reward for the stock is skewed more positively.

The analysts maintained a Market Perform rating and $9.50 price target in their note Tuesday, which followed headlines that Peloton was recalling over 2 million bikes.

“In our many conversations post-Upgrade and Recall, sentiment appears as exaggeratedly negative now as it seemed overly positive at our Downgrade to Underperform years ago,” wrote the analysts. “Recalls are objective negatives. But they happen.”

They explained that their discussions and the Peloton share price drop suggest “a slight negative to other companies became something exaggerated for PTON.”

“We still have plenty of fears around ultimate TAM/ growing churn. Yet, with shares here (even post-recapture), this is likely more than reflected, leaving a more positive risk/reward at current levels,” the analysts concluded.