Peloton Soared 11% Yesterday — Is a Comeback on the Cards?

With Peloton (NASDAQ: PTON) stock already down close to 80% in the last year, many are beginning to wonder if the stock has finally bottomed out. While timing the bottom is all but impossible, recent changes in investor sentiment toward the firm could be indicating — dare I say it — a comeback.

Let’s find out why.

Why did Peloton soar by almost 12% yesterday?

An analyst for Bernstein initiated coverage for Peloton yesterday, giving the company an outperform rating. The thesis behind this suggests that an overly-pessimistic view of the company following its very public fall from grace has caused the majority of the “worst-case scenarios” to be already priced in.

A highly engaged user-base, a growing total addressable market (TAM), and a highly sticky recurring revenue stream from its subscription model were all named as reasons to be hopeful for a revitalized Peloton in 2022 and beyond.

So, should I buy Peloton stock?

Peloton was never likely to continue at the dizzying heights it saw in the middle of the pandemic. A once in a lifetime — hopefully — temporary culture shift to at-home activity saw its stock skyrocket. A fall was always to be expected. 

What a fall it was though.

Having gained over 430% in 2020 alone, the stock peaked at $167.42 in January 2021. Since then, the stock has lost over 85% of its value. A sharp drop in demand, coupled with some notable poor decision-making from management put Peloton in a tough spot.

Now, however, new CEO Barry McCarthy is making pointed progress in changing the direction of the firm. McCarthy’s prior experience at Netflix and Spotify makes him an ideal candidate to further drive subscription-based recurring revenue. A new pricing system announced just last week is a testament to his willingness to experiment with the product in previously unexplored avenues.

The next quarter will be quite telling for the company. Developing a clear path to profitability will be one of the most important things looked for by any potential investor. If Peloton can produce this, while maintaining the clear upsides it already has, this comeback story could begin to gain some real traction.