12:41 PM EST, 11/04/2024 (MT Newswires) -- Peloton Interactive's ( PTON ) continued expense efficiencies could result in "substantial" earnings upside, BofA Securities said in a note Monday.

The firm believes that the company could achieve efficiencies of at least $100 million in the next few years which could be worth 400 basis points of incremental earnings before interest, taxes, depreciation and amortization margin.

BofA said it sees "a large opportunity" for further reductions in operating expenses under Peter Stern, who is set to assume the chief executive role at Peloton on Jan. 1, 2025.

"We also see Peloton's new CEO as well-suited to reinvigorate subscriber growth given experience in hardware, software, subscription services and health and fitness," the firm said.

BofA is optimistic that the company could surpass $300 million in EBITDA this year and a potential for earnings to climb to $400 million or more in the coming years.

Compared to its peers who offer subscriptions, Peloton's operating costs are notably higher than the average, but under the new leadership, there's a significant chance for reducing these costs, increasing margins on hardware, and raising subscription prices.

The main risks include a downturn in customer demand, implementation challenges, and a pessimistic view on the demand for high-priced durable goods. However, the current EBITDA figures are seen as favorable for determining the company's value, according to the note.

BofA upgraded Peloton to buy from underperform and boosted its price objective to $9 from $3.75.

Peloton shares were up 4.5% in recent trading.

Price: 7.58, Change: +0.33, Percent Change: +4.55