Peloton Downgraded by Morgan Stanley on Shift to Gyms, Strength Training

Morgan Stanley downgraded Peloton Interactive (PTON) to Underweight from Equal Weight on Tuesday, arguing that a fundamental shift in consumer fitness habits toward strength training and in-person gyms poses a significant threat to the company's subscriber growth.

Structural Headwinds Pressure Growth

In a note to clients, analyst Nathan Feather said Peloton's cardio-first, at-home business model is facing structural challenges as consumer preferences evolve. The firm highlighted several data points indicating this shift, which runs counter to Peloton's core offerings.

Key headwinds cited by the analyst include:

• Gross subscriber additions have fallen approximately 78% from their peak.
• Connected fitness subscriber growth declined 9% year-over-year in fiscal 2026.
• Google search interest for strength training has overtaken cardio after growing at an 8% compound annual rate for a decade.
• Gym memberships now cover 24% of the population, up from 20% in 2021.

Price Target Cut and Valuation Concerns

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Reflecting this cautious outlook, Morgan Stanley cut its price target on Peloton shares to $4.50 from $5.00, implying potential downside of about 16%. The firm also lowered its fiscal 2027 and 2028 estimates, with its projections for fiscal 2028 revenue and EBITDA now sitting 2% and 9% below consensus, respectively.

Feather argued that consensus forecasts, which model a return to roughly flat subscriber growth within three years, are too bullish. "Consensus is modeling a stark inflection in gross adds which we believe is highly unlikely," he wrote. While Peloton trades at roughly 5 times EBITDA, the analyst stated that valuation alone is not a sufficient catalyst for the stock, writing, "Cheap is not a catalyst."

Limited Near-Term Catalysts

The report suggested that investors should not expect a significant boost from new products in the near term. An anticipated launch of a sub-$2,000 treadmill before the holidays is expected to be only "incremental," according to the note. Morgan Stanley does not foresee the introduction of major new product categories from Peloton until late 2027.