Peloton Interactive, Inc. (PTON) has experienced a rollercoaster journey since going public in 2019. The company’s sleek at-home exercise equipment, featuring digital screens and streaming capabilities, became a pandemic-era sensation. As lockdowns set in and social restrictions mounted, millions turned to Peloton for an engaging workout experience, pushing its stock to a record high of $171.09 per share in early 2021.
But as lockdowns eased, Peloton’s soaring trajectory came to a sudden halt. To steer the company back on track, in 2022, seasoned executive Barry McCarthy, known for his leadership roles at Netflix (NFLX) and Spotify (SPOT), was appointed as the CEO. Despite his expertise, the company faced mounting hurdles, including the departure of four top executives, massive layoffs exceeding 5,000 staff, and even whispers of a potential sale to heavyweights like Amazon (AMZN), Apple (AAPL), or even Nike (NKE).
The company’s struggles culminated in the recall of millions of its bikes, further denting both its reputation and financials. And when McCarthy stepped down as the CEO earlier this year, it seemed to mark a new low point in Peloton’s turbulent journey. But recently, a spark of hope has reignited Peloton’s prospects. In its latest earnings report, the company beat expectations, giving investors fresh hopes of a possible turnaround.
Adding to the momentum, Peloton’s recently announced strategic partnership with retail giant Costco (COST) could unlock fresh growth opportunities for its Bike+. And if that wasn’t enough to turn heads, just a day after generating buzz with its Costco partnership, billionaire investor David Einhorn of Greenlight Capital declared Peloton’s stock to be “significantly undervalued,” further boosting investors' confidence toward the stock.
A rosier-than-expected earnings report, key partnerships, and a vote of confidence from a prominent hedge fund boss all appear to have flipped the script for Peloton. While PTON stock is still down more than 96% from its 2021 highs, the struggling company is slowly clawing back from its post-pandemic lows. So, is now an opportune time to grab a piece of this fitness stock while it's still cheap? Let’s take a closer look to find out.
About Peloton Interactive Stock
New York-based Peloton Interactive, Inc. (PTON) redefines fitness with expert-led instruction and world-class content, delivering engaging workout experiences for everyone, no matter where they are on their fitness journey. Peloton makes its premium content available through various platforms, including the Peloton Bike, Peloton Tread, and Peloton Digital.
Whether at home, outdoors, on the go, or at the gym, Peloton combines innovative hardware, cutting-edge software, and exclusive content to keep its community motivated. Founded in 2012, Peloton now connects millions of members across the U.S., UK, Canada, Germany, Australia, and Austria.
Valued at a market cap of around $2.4 billion, Peloton shares have pulled back 96.3% from their 2021 all-time high. However, over the six months alone, PTON stock has staged a stunning comeback, delivering gains of nearly 101.2% - which easily dwarfs the broader S&P 500 Index’s ($SPX) 14% return over the same time frame.
When it comes to valuation, PTON stock is trading at just 0.88 times sales. This figure is notably below both its sector median and its own five-year average, positioning the stock as a bargain for investors.
Peloton’s Q4 Earnings Beats Projections
In a strong finish to fiscal 2024, Peloton delivered an impressive Q4 earnings report on Aug. 22 that exceeded Wall Street’s top- and bottom-line expectations, and the stock soared over 35% in a single day. The company reported total revenue of $643.6 million, slightly up year over year, and surpassing Wall Street’s forecast of $627.4 million.
The subscription segment continued to be a powerhouse, generating $431 million in revenue, a 2.3% rise from the previous year. This solid performance, alongside a consistent low churn rate and a robust gross margin of 68.2%, underscores the strength of Peloton’s recurring revenue model.
For the second consecutive quarter, the company achieved a positive adjusted EBITDA of $70 million, a dramatic turnaround from the negative adjusted EBITDA of $34.7 million in the same period last year.
Even more remarkable was Peloton’s bottom-line performance. The company narrowed its net loss to just $0.08 per share, marking a significant improvement from the previous year’s loss of $0.68 per share, and crushing analysts' projections by 55.6%.
With all eyes now on the company’s fiscal 2025 Q1 earnings results, scheduled to be unveiled before the market opens this Thursday, Oct. 31, investors will be eager to see if Peloton can maintain its momentum and build on the successes of Q4.
Management projects total revenue for the quarter to land between $560 million and $580 million, while gross margin is anticipated around 50%. Additionally, adjusted EBITDA is forecasted to range between $50 million and $60 million.
PTON Stock Soars on Bullish Nod from Billionaire David Einhorn
On Oct. 23, Greenlight Capital’s David Einhorn ignited excitement among investors by declaring that Peloton's stock is significantly undervalued, leading to a remarkable 11% surge in its share on the very same day.
Speaking at the Robin Hood Investors Conference - while riding a Peloton bike, no less - Einhorn made a compelling argument for the company's potential, though he did not disclose a specific price target for the stock.
As of June 30, Greenlight Capital held an approximately $6.8 million stake in Peloton, highlighting the hedge fund’s commitment to the brand amid its ongoing volatility.
What Do Analysts Expect For Peloton Interactive Stock?
Even with a wave of positive catalysts lifting investor optimism, Wall Street is still treading carefully, maintaining a consensus “Hold” rating on PTON stock.
Of the 19 analysts offering recommendations, two advise a “Strong Buy,” 15 suggest a “Hold,” one analyst advocates a “Moderate Sell,” and the remaining one recommends a “Strong Sell.”
While the stock is already trading at a premium to its average analyst price target of $5.53, the Street-high target of $20 signals a whopping 199% potential upside from the current price levels.
On the date of publication, Anushka Mukherji did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
