{{articledata.title}}

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.

This content was originally published on http://Investing.com