“While it’s never fun to lead off a Buy report with a ‘patience required’ asterisk of sorts, that’s exactly what we find ourselves doing here,” Woronka wrote.

The exercise bike manufacturer (ticker:

PTON

) became a darling stock in 2020 when the coronavirus pandemic boosted sales of at-home exercise equipment. It has since lost favor among Wall Street bulls as the company has grappled with manufacturing woes and people have returned to gyms.

Peloton stock was down 4% to $42.63 on Friday. The shares have lost about 71% this year.

Disappointing third-quarter earnings sent the stock on a downward spiral in November, driving it to its lowest levels since July 2020 and prompting a series of price target slashes. Peloton reported a net loss of $376 million, or $1.25 a share, in its latest quarter, delivering a worse performance than the loss of $1.10 a share expected by Wall Street. 

Peloton now expects to end the 2022 fiscal year with 3.35 million to 3.45 million connected fitness subscribers, down from a prior forecast of 3.63 million. Its outlook for fiscal-year revenue ranges from $4.4 billion to $4.8 billion, down from a prior forecast of $5.4 billion.

Of the 31 analysts covering the stock, 16 rated it a Buy, 12 rated it a Hold, and two rated it a Sell.

In his note, Woronka noted that the market is looking at fitness stocks as an “either/or” sector — either people return to gyms full-time or continue working out at home.

“That’s an oversimplified view of the world; we think the hybrid work model extends to fitness, too, and that PTON has plenty of momentum to regain operationally,” he said.

Woronka brushes off fears that the at-home fitness trend was just a “fad,” pointing to Peloton’s strong growth trajectory before the first Covid case was reported.

While investors have been spooked off by lower sales volumes for the company’s core Bike product and recent recall of its Tread Plus machine, Woronka sees several upsides in the coming year. Peloton’s new, lower -priced Tread model could outpace the Bike units within a few quarters, he said. He also foresees the company’s subscription revenue growing rapidly by 2024.

He also outlined other growth opportunities for the company, such as tapping into the corporate fitness market and expanding into international markets to continue growing.

The brand also has a cult-like following that it could leverage to “expand the content platform into new, adjacent mediums that don’t necessarily fit neatly into the traditional fitness bucket,” Woronka wrote. Peloton’s churn rate is extremely low, hovering below 1% for all periods the company has disclosed it dating back to 2019.

“We think if indeed the stock can regain its footing for fundamental reasons, it has quite a bit of room to run,” he said.

Write to Sabrina Escobar at sabrina.escobar@barrons.com