Peloton can rally 12% as demand continues to surpass supply in early 2021, Bank of America says

Peloton deliveries were delayed 10 weeks as of January 6, signaling demand still outstripped supply at the end of the holiday season.

• Peloton's strong growth throughout 2020 is set to continue and lift shares to new heights, Bank of America said Tuesday.
• The bank's analysts lifted their price target for the company to $175 to $150, implying a 12% rally from Tuesday's close over the next 12 months.
• The exercise-hardware manufacturer's deliveries were delayed by 10 weeks as of January 6, signaling demand still outstripped supply at the end of the holiday season.
• The company's product pipeline and a new factory should expand its addressable market and bolster supply throughout the year, the bank said.
• Watch Peloton trade live here.

The success story that was Peloton in 2020 isn't over yet, according to Bank of America.

Analysts Justin Post and Joanna Zhao lifted their price target for the fitness-equipment company to $175 from $150 on Tuesday, implying a 12% climb from Tuesday's close over the next 12 months. The bank maintains a "buy" rating on the shares.

Where the pandemic roiled most industries, stay-at-home orders propped up demand for Peloton's exercise hardware. Analysts boosted price targets throughout the year as order backlogs lengthened and shares kept climbing.

Delivery times have since softened, but Bank of America's analysts see enough unmet demand to boost Peloton's stock. Delivery delays for the company's Bike, Bike+, and Tread+ products rose to 10 weeks as of January 6, remaining elevated while down from the 12-week peak.

The holiday-season backlog should bolster sales into the next quarter, and a new factory expected to have come online last month should alleviate some delay pressures, the team said.

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Peloton surged as much as 8.3% to an all-time high in Wednesday trading.

The company's future product lineup also played into the analysts' bullish outlook. The team expects Peloton to unveil a cheaper treadmill product in the March quarter before rolling out a certified pre-owned program in the summer. A new product category is also expected to be revealed by the end of the year. The wider array of hardware should help Peloton surpass difficult year-ago comparables in 2021, according to the team.

A hit to supply stands out as the biggest near-term risk for shares, they said, adding Gym reopenings and vaccine sentiments can also weigh on the stock over the next year.

Peloton traded at $156.04 as of 3:30 p.m. ET, up roughly 8% year-to-date. The company has 50 "buy" ratings, four "hold" ratings, and one "sell" rating from analysts.

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