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Platoon shares have fallen 80% in the past 12 months.

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Interactive Platoon

plans to increase the price of its base subscription while reducing the prices of its bikes and treadmills. The move could help sell more bikes, but will also weigh on margins in the short term.

Starting in June, the company’s connected fitness subscription will increase from $5 to $44 per month. Cheaper prices on the company’s basic exercise machines have already been rolled out. The Connected Fitness Membership is essential for accessing many of the features the Peloton Bike and Tread are known for, like classes, workout programs, and simulated scenic rides.

A team of Evercore analysts wrote in a note Monday that expectations for the company’s fourth-quarter revenue and gross profit may be too high due to equipment price cuts, though they add that the higher subscription cost will help drive revenue growth over the period. long term.

“We see Peloton’s recent price reductions on its Bike and Tread products (globally) and price increases for its all-access subscription in North America, as a long-term positive and a short-term negative. for the company,” the analysts wrote.

Platoon shares have fallen 80% in the past 12 months. The company did not anticipate a drop in demand after gyms reopened. Amid calls from some investors to sell the company, Barry McCarthy took over as CEO to help turn the tide and make the case for further upside. Wall Street seems unconvinced, with stocks still down 33% year-to-date.

Evercore ISI analysts say the lower equipment price eases the barrier to entry and expands Peloton’s potential customer base, while the higher subscription price will increase the long-term value of each subscriber.

Analysts write that McCarthy could create the company to focus on improving the Peloton platform, pointing to his track record as chief financial officer at


netflix

(NFLX) and


Spotify

(PLACE). The higher price could help fund better content, more engaging courses and a friendlier experience, the analysts write.

Looking ahead to fiscal 2023, which would be the first full fiscal year with the new pricing, analysts believe the changes could lead to a 10% increase in units sold and a subsequent increase in subscriptions. That would imply $128 million higher total revenue for the fiscal year, but $4 million lower gross profit.

“Having said that, this is just one exercise and, as mentioned above, we believe the [long-term value] increase in all-access membership more than offsets price reductions on Peloton’s Bike and Tread products,” they write.

Write to Connor Smith at [email protected]