Morgan Stanley Reiterates Underweight Stance on Peloton, Cites Overly Optimistic Growth Outlook

Morgan Stanley has reaffirmed its Underweight rating on Peloton (PTON), pushing back against several bullish arguments for the connected fitness company. In a note to clients on Thursday, the investment bank argued that market expectations for a significant turnaround in subscriber growth are overly optimistic.

A High Bar for Growth

The core of the bank's bearish thesis centers on the high expectations for user acquisition. Analyst Nathan Feather noted that while the market acknowledges the structural headwinds facing Peloton, consensus forecasts already price in a significant rebound.

According to the note, consensus models expect Peloton's gross subscriber additions to inflect and rise by 36% over the next three years. Feather described this as a "high bar which we think is unlikely to be met," especially following five consecutive years of double-digit percentage declines in the metric.

Product Launches and Market Share

Morgan Stanley addressed the bull case that new products, such as a more affordable treadmill or a connected strength machine, could reignite growth. While acknowledging new hardware would be "incrementally beneficial," Feather stated that "the market is already pricing-in optimistic growth assumptions."

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The note also pointed to the historically poor track record of connected strength machines, which have often been too large, expensive, or insufficient for serious training. Regarding market position, the bank highlighted key figures:

• Peloton's share of the total bike, tread, and rower market has fallen to an estimated 9%, down from a pandemic-era peak of roughly 38%.
• However, it maintains a dominant 45% share of the more relevant connected fitness market.

Context for the Call

The analyst note directly addressed other points of optimism from some investors, including potential growth from the commercial segment and the impact of share buybacks. The communication follows Feather's recent decision to downgrade Peloton to Underweight from a prior Equal Weight rating, signaling the bank's sustained caution on the stock's prospects.