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 went on a steep, downhill ride.
Now, shares are pedaling 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 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.
Shares Jump On Clothing Line Launch
PTON stock jumped more than 16% the week of Sept. 7 after the popular fitness platform released its own line of activewear apparel. The initial launch of the Fall collection will include styles ranging in price from $15 to $118. Customers can purchase the new Peloton clothing line online and in select Peloton showroom locations worldwide.
Peloton previously partnered with labels like Lululemon (LULU) and Beyond Yoga on co-branded clothing items. The company first began selling activewear apparel in 2014 in response to member demand before launching its private label this month.
Peloton Stock Earnings
PTON stock plunged after Peloton Q4 earnings on Aug. 26 missed Wall Street’s expectations for the bottom line. The connected-fitness platform reported a loss of $1.05 per share on revenue of $937 million. Analysts expected Peloton to lose 44 cents per share on sales of $929 million, according to FactSet estimates.
The company’s wider-than-expected loss comes amid a global economic reopening and supply constraints after the coronavirus pandemic led to an explosion of at-home workouts in 2020.
On a positive note, Peloton’s total membership increased over the last quarter to top 5.9 million members. Connected fitness subscriptions popped 114% to 2.33 million. Paid digital subscriptions surged 176% to 874,000.
While subscription growth boosted revenue, $100 million in costs due to safety recalls weighed on the bottom line. In May, Peloton announced the recall of the Tread and the Tread+ after reports of injuries. But Peloton said its new Peloton Tread will begin selling in the U.S., Canada and the United Kingdom on Aug. 30.
Looking ahead, Peloton sees Q1 revenue of $800 million, below analysts’ estimates for $1 billion. It expects to have 2.47 million connected fitness subscriptions, compared with expectations for 2.502 million.
New Peloton Treadmill Rolling Out
Peloton earnings come just days after the company announced the launch of a new treadmill. After a late August rollout in Peloton’s primary markets, it will debut in Germany later in the fall. New Tread units will cost $2,495.
Peloton is offering to repair existing Tread treadmills in the U.S., UK and Canada to keep the touch screen attached. New units sold will come with the repair.
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 22 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 amid supply-chain and recall woes. PTON stock now has a RS Rating of 6 out of a best-possible 99. Stocks with scores above 90 for both Composite and RS are typically worthy of further analysis to determine whether they are buyable.
Peloton stock has an EPS Rating of 22 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 currently ranks No. 74 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. You also want to focus on top stocks within those leading groups — ones showing strong technical action and solid fundamentals.
PTON Stock Technical Analysis
After a huge run in 2020, Peloton stock is in an extended cool-down mode.
Heading into Q4 earnings, Peloton stock was working on a base with a 129.80 buy point. But a gap-down on the results in heavy volume is sending shares to its lowest levels since June, undercutting the prior lows of its base.
PTON stock perked back up thanks to its new clothing line. Shares broke a downward trend line on Sept. 9 after jumping more than 9% on news of its apparel brand launch. Shares popped 16% that week, with Peloton retaking its 50-day line and building a bottoming base.
However, PTON stock has given back those gains and then some. Shares are now moving toward their May lows.
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 50% below all-time highs. A big move up after the announcement of Peloton’s private clothing label put the stock back near previous levels of resistance. But shares quickly gave back those gains and then some after Amazon announced its own fitness platform in late September.
Follow Alexis Garcia on Twitter at @IBD_Alexis.
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