Should You Buy Peloton Stock with $10,000? Here’s What You Need to Know!
Hey there, fellow investors! If you’re considering putting $10,000 into Peloton Interactive stock and holding onto it for 10 years, let’s break down what’s happening with the company and whether this investment makes sense.
A Quick Overview of Peloton
Peloton Interactive skyrocketed during the COVID-19 pandemic, with its stock climbing 550% from its public debut in 2019 to its peak in January 2021. Everyone wanted to work out from home, and Peloton’s bikes and treadmills became hot commodities. But fast forward to today, and things are a bit different.
Currently, Peloton’s stock is trading around $8.68, a whopping 95% drop from its all-time high. Despite a rise of 73% over the past year, investors are left wondering— is now the right time to buy?
Cost-Cutting Measures
Recently, Peloton's leadership announced plans to slash another $100 million in expenses this year. Last year, the company reported a loss of $118.9 million, which is an improvement from the previous year’s loss of $551.9 million. There’s also some good news—Peloton achieved a surprising net income of $21.6 million in Q4 during a time people expected losses.
Peloton has been busy trimming costs across various departments like sales, marketing, and R&D, resulting in a $200 million reduction in expenses last fiscal year. Plus, its net debt has nearly halved, now sitting at $459 million. So, what’s the catch?
Growth Challenges
While it’s great that Peloton has managed to stop losing money, the real question is: Can it return to growth? As of June 30, Peloton had 2.8 million subscribers, down from nearly 3 million two years ago. This decline has led to revenue pressures, which dropped 6% year-over-year.
The company is pivoting toward subscriptions, a higher-margin income source, but it’s struggling to excite customers about its fitness equipment again. To tackle this, Peloton has teamed up with retailers like Amazon, Dick's Sporting Goods, and Costco, even expanding their in-person workout events with popular instructors. But will these efforts be enough?
Forecasts suggest Peloton’s revenue will grow a mere 1% over the next three years. Not exactly thrilling, right?
The Bottom Line: Proceed with Caution
While Peloton's recent profitability is a promising sign that’s helped boost its stock, investors should exercise caution. The stock is currently valued at a price-to-sales ratio of 1.2, which looks cheap, but the real challenge lies in returning to growth.
If Peloton can attract more subscribers, revenue could rise, leading to better earnings potential over the long haul. As it stands, the likelihood of significant growth seems low.
For now, unless you’re feeling particularly brave (or lucky), it might be best to hold off on investing that $10,000 in Peloton stock.
Final Thoughts
Investing in stocks always carries risks, and Peloton's current situation showcases the volatility of the market. Make sure to do your homework, weigh the pros and cons, and consider your investment strategy carefully.
Curious about other potential investments? Check out our other articles for tips on smart stock picking and portfolio management. Happy investing!
About the Writer
Neil Patel is a seasoned analyst at The Motley Fool, specializing in consumer trends and finance. With a background in corporate finance and investing, Neil shares insights to help you navigate the stock market effectively.
What do you think? Would you take a chance on Peloton? Let us know in the comments below!
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