David Einhorn believes Peloton could be valued at five times its current worth.

• Greenlight Capital, led by David Einhorn, holds a $6.8 million stake in Peloton and believes the company could be worth five times its current value if it reduces expenses.
• If Peloton exceeds its current EBITDA projections by $450 million, it could potentially have a share price ranging from $7.50 to $31.50 per share, according to Einhorn at the Robinhood Investors Conference.
• After refinancing its debt earlier this year, the Bike and Tread maker has shifted its focus to reducing expenses and maximizing profits, rather than prioritizing growth.

According to CNBC, David Einhorn of Greenlight Capital believes that if the company reduces expenses, its adjusted EBITDA projections could be doubled, potentially causing the stock price to reach $31.50 a share.

The current price of the shares is five times higher than its midday trading price on Friday, which was approximately $6.20.

At the Robin Hood Investors Conference on Wednesday, Einhorn used a Peloton bike to discuss the company's past mistakes and the potential for a turnaround, as seen in a copy of the presentation obtained by CNBC.

According to Einhorn, if Peloton can generate $450 million in EBITDA, which is about double its current projections, its stock price could range from $7.50 to $31.50 a share, based on a benchmark study of comparable companies.

Einhorn stated that Greenlight's analysis does not anticipate any growth in subscription revenues from new customers, price increases, or other new initiatives, such as activation fees from the expanding used bike market and international expansion.

"Bankruptcy can force change, as Peloton has demonstrated by right-sizing and stopping cash burn. It has refinanced its debt to extend maturities and its loyal customer base pays $44 per month, making it a valuable subscription business."

Einhorn presented his stock pitch as if he was an instructor leading a workout class, occasionally addressing the investors in the room. The first slide of his deck was titled "15-minute 'Stock Pitch Ride'" and featured an image of Einhorn on a Peloton bike.

Einhorn began the pitch by acknowledging the investors and sponsors, in a manner similar to a Peloton instructor addressing class participants.

The leaderboard on each page of the deck displays other riders, including investor Bill Ackman and Robin Hood CEO Richard Buery, in addition to Einhorn's speed, cadence, and resistance, as if users are taking a Peloton bike class.

Greenlight and Peloton declined comment to CNBC.

Greenlight, with a $6.8 million stake in the company as of June 30, conducted a benchmark study comparing Peloton's cost structure to three sets of peer companies: fitness businesses like 24 Hour Fitness, consumer subscription companies like Netflix, and consumer online subscription businesses like Amazon Prime.

Despite Peloton's efforts to reduce expenses and control its cash burn, it is still experiencing "basically zero adjusted EBITDA" compared to the median of $406 million among its peers, according to Einhorn's pitch.

"According to Einhorn, over a third of gross profit flows through to EBITDA for peers. One issue is that Peloton invests too heavily in research and development. For instance, Peloton spends twice as much on R&D as compared to Nike, and Adidas has eight times more sales and a significantly larger number of product lines."

Einhorn stated that Peloton's stock-based compensation expense of $305 million in fiscal 2024 is double the peer median and comparable to far larger companies like Spotify and Netflix, which are 30 times and 140 times larger, respectively.

Peloton's high-margin subscription business generated $1.71 billion in revenue in fiscal 2024 with a gross margin of about 68%. If Peloton can make deep cost cuts, the company could generate far more free cash flow and EBITDA without needing to sell more bikes and treadmills, and without needing to grow its subscriber base.

Peloton recently declared that it would lay off 15% of its workforce, shut down retail outlets, and modify its international sales strategy as part of a series of cost-saving measures. These actions are expected to decrease annual run rate expenses by over $200 million by the end of fiscal 2025.

In August, Peloton predicted that it could achieve an adjusted EBITDA of between $200 million and $250 million in fiscal 2025. However, Einhorn argued that if the company improved its cost structure to match the benchmark, it could generate $400-$500 million in EBITDA from its current subscription revenue base.

If Peloton reaches $450 million in EBITDA, its potential share price could be between $7.50 and $31.50, according to the expert.

According to Einhorn, the company requires new management to reach its destination. Boone, Peloton's interim co-CEO, stated that she anticipates the new top executive will be appointed before the company's next earnings report, which is now scheduled for Thursday.

"According to Einhorn, the advantage of their thesis is that they don't need to convince Peloton that it's the right approach since Peloton's interim co-CEOs are already promoting a recurring, high-margin subscription revenue stream business and have implemented an initial cost-cutting plan, leaving room for the new CEO to make further adjustments."

He stated that the company consistently receives high praise from both consumers and fitness publications, and its customers are extremely devoted. Additionally, he mentioned that although fitness enthusiasts are resuming their gym routines, home workouts will continue to be popular.

"According to Einhorn, exercising at home is not a passing trend, but rather a long-term trend towards healthier lifestyles that will drive subscriber growth over time."