Peloton Interactive (PTON) is arguably one of the hottest names in the fitness space. With more than 5.4 million members, the nine-year-old global brand is looking to expand its reach. Peloton stock was one of the bright spots in the coronavirus stock market rally, with a gain of more than 440% in 2020. After reaching a peak in January 2021, PTON stock has been on a steep, downhill ride.
Shares are trying to pedal off lows. But it’s far from an all-out sprint.
Peloton generates most of its revenue through sales of bikes and treadmills, which range in price from $1,895 to $4,295. The All-Access membership for owners of its expensive equipment runs $39 a month. A digital membership — with no access to bike or tread classes — is $12.99 a month.
To determine if Peloton stock is a buy now, it’s key to analyze fundamental and technical metrics first.
PTON Stock Drops After ‘And Just Like That’ Cameo
Shares of Peloton sank roughly 11% on Thursday after being featured in a shocking plot point in the “Sex And The City” revival aired on HBOMax. PTON stock continued to fall on Friday, falling roughly 5% and hitting a 19-month low.
Peloton was aware the product would be featured in the “And Just Like That” series, but was not aware of the role it would play in the show. On Thursday, Peloton had to release a statement to stem the fallout from its Hollywood cameo.
The latest PTON stock sell-off also came as many highly valued former leaders tumbled as well.
Peloton Announces $1 Billion Stock Offering
Peloton on Nov. 16 announced plans to raise roughly $1 billion in a forthcoming stock offering. The move comes just weeks after the popular bike maker said it would not need to raise more capital. But Peloton has struggled to maintain its 2020 momentum. Reopening plays like Planet Fitness (PLNT) have gained a bit more steam as customers return to in-person gyms and classes.
PTON stock will reportedly issue roughly 23.9 million shares of its Class A common stock at a public offering price of 46 a share. That amount would raise roughly $1.07 billion for the connected fitness platform.
Peloton stock cratered in November after the company reported wider-than-expected losses on Q1 earnings. On the quarterly call, executives lowered their annual revenue outlook by about $1 billion.
Launches Smart Camera Platform
Peloton unveiled a new product on the heels of disappointing Q1 earnings. The Peloton Guide will be a strength training camera that can track and follow user movements. The technology also employs machine learning to help users improve their form and will integrate with classes on Peloton’s digital fitness platform.
Peloton expects to launch this new device in early 2022 at a retail price of $495. Users will also need to purchase a Peloton Guide membership for $12.99 per month. PTON stock edged down slightly on the news.
Peloton Stock Dives On Earnings
PTON stock plunged after its Q1 earnings report on Nov. 4. Peloton reported a loss of $1.25 per share on revenue of $805.2 million. Analysts expected the fitness platform to deliver a loss of $1.15 per share on revenue of $804.1 million, according to Zacks Investment Research. Shares of Peloton plummeted roughly 34% as investors reacted to the wider-than-expected loss.
Weakened sales growth and the ongoing supply chain backups seemed to contribute to the earnings miss for PTON stock. The fitness platform has seen increased competition as more people return to in-person gyms and workout classes. More companies offering connected-fitness products have entered the market as well.
Softening sales also led Peloton to slash its guidance for the full fiscal year. Executives now expect Peloton revenue could be 20% below earlier forecasts. “A softer than anticipated start to Q2 and challenged visibility into our near-term operating performance is leading us to recalibrate our fiscal year outlook,” CEO John Foley wrote in a Nov. 4 letter to investors.
PTON Stock Drops On Amazon Deal
Peloton stock dropped roughly 7% the week of Sept. 27 as a new competitor entered the digital fitness space. E-commerce giant Amazon (AMZN) announced it’s launching its own fitness platform. The service, called Halo Fitness, will feature interactive home video workouts that pair with Amazon’s Halo fitness tracker.
The new service will launch later this year with subscriptions starting at $3.99 a month. PTON stock dropped 5% in trading action on the Sept. 28 announcement. Shares extended those losses over the week as the overall market took a hit.
Peloton Stock Fundamental Analysis
To determine whether Peloton stock is a buy now, fundamental and technical analysis is key.
The IBD Stock Checkup tool shows that PTON stock has an IBD Composite Rating of 16 out of a best-possible 99. The rating measures a stock based on the most important fundamental and technical stock-picking criteria.
The Composite Rating looks at earnings and sales growth, profit margins, return on equity and relative stock price performance, among other metrics.
After its big run last year, Peloton stock’s Relative Strength Rating has taken a big hit in 2021 as more people return to gyms and in-person fitness classes. PTON stock now has a dismal RS Rating of 1 out of a best-possible 99. The RS Rating measures a stock’s price performance vs. all other stocks in IBD’s database over the last 52 weeks.
Peloton stock has an EPS Rating of 7 out of 99. The EPS rating compares a stock’s quarterly and annual earnings-per-share growth with that of all other stocks.
The Leisure-Services industry group has rebounded as of late and currently ranks No. 30 among the 197 groups IBD tracks. Focusing on industry group strength, and improvement in industry group rank, is ideal when selecting stocks for your watchlist. CAN SLIM investors also focus on top stocks within those leading groups — ones showing strong technical action and solid fundamentals. Peloton stock is a laggard in its group.
PTON Stock Technical Analysis
After a huge run in 2020, Peloton stock is in an extended cool-down mode.
Shares plummeted roughly 34% after Q1 earnings. That sent PTON stock well below its downward sloping 40-week line. Before that move, Peloton stock was hitting resistance at its 10-week line. Despite various fundamental catalysts, like the announcement of Peloton’s apparel brand launch in early September, PTON stock has failed to generate sustained momentum to the upside. It’s roughly 78% below its January 2021 all-time high of 171.09.
Peloton Stock: A Buy Right Now?
The long-term outlook for Peloton remains compelling, but the technical picture is weak.
Bottom line: Peloton stock is not a buy right now. The stock has a long way to go to prove itself, with shares roughly 78% below all-time highs. Q1 earnings sent PTON stock well below key technical levels. Investors would do well to wait and see if Peloton can sustain an upward move and build a proper base before thinking about buying.
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