Peloton’s slower recovery: New products target new users as Goldman Sachs cuts long-term forecasts and price target
Goldman Sachs expects connected fitness subscriptions to return to growth only in fiscal 2029. A lower-priced folding treadmill and AI personalization features are intended to attract and retain users, respectively, but the app’s user base and usage time continue to decline, while growth investment also limits margin improvement.
Original source：Goldman SachsFirst published on Unhidea：Original source date：
Key takeaway
Goldman Sachs maintains its Buy rating on Peloton, but a slower subscription recovery and continued investment in growth have led it to lower both its longer-term performance forecasts and valuation multiple.
When will subscriptions return to growth?
Goldman Sachs defines Peloton’s next phase as restoring sustained revenue growth on its lower post-restructuring cost base. The key is whether faster user acquisition and lower churn can occur together.
The bank expects connected fitness subscriptions to fall from 2.336 million at the end of fiscal 2027 to 2.199 million at the end of fiscal 2028, before recovering to 2.222 million in fiscal 2029. Its forecasts for the latter two years are 5% and 8% below its previous model, respectively. The recovery path is therefore slower.
Management attributed some recent churn volatility to subscription pauses related to price increases and a temporary adjustment to its payment reactivation algorithm. On that basis, Goldman Sachs expects churn to normalize gradually, while relying more heavily on faster user acquisition.
How can the new treadmill broaden customer acquisition?
The Tread Flex lowers the purchase hurdle with a lower price and a smaller footprint: its volume shrinks by nearly 50% when folded. It costs 2,195 dollars in the US, goes on sale in North America from 1 October 2026, and is planned for other markets in spring 2027.
The value of this product cycle depends on whether it can attract new members from outside the existing ecosystem. If sales come mainly from existing members replacing their machines, hardware revenue could improve, but that alone would be unlikely to restore subscription growth.
How much evidence is there that AI can improve retention?
Peloton IQ enhances subscription value through features such as running-form analysis and personalized pacing. Goldman Sachs sees the near-term focus as increasing engagement and reducing churn, with differentiated subscription tiers and additional charges representing longer-term opportunities.
SensorTower data show that, in the first quarter of fiscal 2027, the number of app opens per monthly active user worldwide rose 15% year on year, while total opens fell about 6% and monthly active users fell about 19%. Total global app usage time fell about 26%, and average daily usage time declined from 14.3 minutes a year earlier to 12.3 minutes. Retained users opened the app more frequently even as overall usage contracted.
These are directional indicators for the mobile app and use a different definition from the company’s connected fitness subscriptions. The new AI features also launched on 1 October, after the data window for that quarter.
Can improved cash flow cover investment in growth?
The company guides for free cash flow of at least 350 million dollars in fiscal 2027, and refinancing is under way. Goldman Sachs believes the discussion of financial flexibility is shifting toward how funds can support growth and long-term capital allocation.
New product development and promotion require continued investment, so Goldman Sachs has moderated its margin-improvement assumptions: its fiscal 2027 adjusted EBITDA margin estimate falls from 21.4% to 20.9%. The bank expects free cash flow of about 364 million dollars that year, below the 378 million dollars in fiscal 2026; the recovery in revenue and improvement in cash flow are not occurring in step.
Why maintain a Buy rating while cutting the price target to 6.50 dollars?
Goldman Sachs forecasts fiscal first-quarter 2027 revenue of 552 million dollars and adjusted EBITDA of 139 million dollars, both slightly below market consensus of 555 million and 144 million dollars, respectively. The larger revisions are further out: its fiscal 2029 revenue forecast is cut by 5%, adjusted EBITDA by 6%, and free cash flow by 7%.
Goldman Sachs remains positive on the integrated ecosystem of hardware, AI software and community and maintains its Buy rating, but cuts its 12-month price target from 7.50 dollars to 6.50 dollars. Alongside lower earnings forecasts, the valuation multiple applied to free cash flow after deducting equity compensation falls from 16 times to 13 times, reflecting a repricing of the expected pace of growth.
