Wall Street analysts reveal why they remain 'big believers' in Peloton despite its astonishing 'fall from grace'

• Peloton's stock price tumbled on Thursday after it reported weaker-than-expected earnings results.
• But Wedbush analysts say they aren't losing confidence in the company just yet.

Peloton's stock price tumbled after the high-tech at-home fitness giant reported weaker-than-expected first-quarter earnings on Thursday and cut its guidance for the year by up to $1 billion.

Though some investors have clearly lost confidence, a group of analysts is still bullish about its potential for long-term growth.

"The fall from grace for Peloton in such a short period of time is fairly astonishing," Wedbush analysts wrote in a note to clients early Friday.

"Still, we continue to be big believers that the secular trend towards at-home fitness is undeniable and that Peloton is the best bet to be the category leader of this trend," they said.

High-tech at-home fitness concepts were gaining ground in the years running up to the pandemic but when consumers found themselves trapped at home, these exploded in popularity and some die-hard gym-goers who were working out at home for the first time said they wouldn't go back to their old ways.

Peloton, which is considered to be an early pioneer in the high-tech home fitness space, has led the way with its home exercise bike, treadmill, and virtual classes. The company was well-positioned to benefit from changing habits in the early days of the pandemic and saw sales soar because of this.

But as the space has become more crowded, some investors have been skeptical as to whether the company can keep up this momentum.

Peloton's earnings results on Thursday were also an indication of how challenging the market has become for home-fitness players post-pandemic as the world starts to go back to normal and people return to gyms.

Revenue grew 6% to $805 million in the most recent quarter, compared to 232% growth in the same period a year earlier.

Also in the most recent quarter, sales of connected fitness products, such as Bikes and Treads, fell 17% to $501 million. While subscription revenue grew 94% to $304 million, there are signs that subscribers are less engaged. They completed four fewer workouts per month in the quarter compared to a year earlier.

But Peloton isn't taking any of this standing still, Wedbush analysts wrote, adding: "the company appears to be pulling every lever available to it."

The company now has its work cut out for it in the run-up to the all-important holiday shopping season, these analysts said in an earlier note this week, stressing that it should double down on advertising to raise awareness about its products.

That's especially true for its new lower-cost treadmill, they said, which hit the market in August and has so far seen an underwhelming response from customers.