Is it too late to buy Peloton Interactive stock?

Exercise equipment specialist Peloton Interactive (PTON 3.16%) has been a volatile investment in recent years.

Home gyms have been popular during lockdowns and quarantines caused by the coronavirus, and Peloton’s stock has risen from $20 to $167 a share in 2020. The company was worth $49.3 billion at its peak, buoyed by growth sales boom.

But that boom didn’t last. Today, Peloton’s stock price is down 97% from its COVID-inspired record high. The stock’s total market value fell to $1.7 billion.

But it’s not all doom and gloom. Peloton shares have gained 30% from multi-year lows since August. Is it too late to buy Peloton stock now, or will the company create value for investors with a sustained recovery?

Return effort

Peloton recently achieved its comeback in earnest — posting stronger-than-expected results in the fourth quarter of fiscal 2024. Topline sales rose 0.2% year-over-year, breaking a series of declining revenues that began at the beginning of the year. 2022. Peloton’s net loss per share was also lighter than expected, nearly breaking even for the first time since spring 2021.

These improvements resulted from concrete business improvements. Peloton has cut costs since the home gym boom ended and accelerated its cost-cutting program this spring. Management has also recently refinanced the balance sheet with longer-term debt securities and a new equipment rental service launched in the UK last quarter.

So Peloton is not sitting on its hands. The company is actively working on a turnaround plan and is making significant progress so far.

Peloton’s Challenges

No one said recovery would be easy, though.

Recent progress has been led by an interim leadership team. Former Netflix and Spotify CFO Barry McCarthy stepped down as CEO in May, but remains connected in an advisory role as Peloton searches for its next CEO.

As the advisory extension suggests, McCarthy appears to have left the company on good terms — quitting to find another adventure rather than being fired. In his farewell note, he said Peloton should continue its fiscal discipline until profits and free cash flow are persistently positive. High-octane growth can wait until the financial platform is stable.

It may sound easy, but it’s not. Will the next management team rise to the challenge of breaking up McCarthy? Only time will tell.

Health trends come and go. Peloton operates in a highly competitive market with unpredictable long-term results. Gym stocks may grow faster than my waist during the holidays, but they drain and disappear as quickly as my post-workout electrolyte drink.

Is this home gym stock a buy today?

Honestly, I expected to find more red flags than bullish signs when I started this Peloton review. Luxury treadmills and stationary bikes with exclusive educational content have had their day. The glory days are gone and will never return. Correct?

But now I’m not so sure. Peloton has been in bad shape for a while, but the damage has been shallow enough that a few quarters of layoffs and cost-cutting could get it back on track. Now, the company is closing in on positive earnings, along with modest — but still real — revenue growth.

I wouldn’t recommend making a big investment in Peloton today. Returns are always risky and difficult, and even more so in markets that rely on fickle consumer tastes.

But I like the direction Peloton is heading in, and the company could actually have a long-term future under the right leadership.

So it might not be too late to buy Peloton stock today. In fact, a small investment in this speculative comeback story might make perfect sense. The stock is still rated for absolute disaster, even after the recent earnings-based jump. Just surviving for a few more years might be good enough to inspire some serious shareholder returns. Just check your risk tolerance before you jump in and be prepared to lose everything if the recovery effort doesn’t work.