A Forgotten, Pandemic-Era Stock Crawls From the Wreckage and I'm Buying

Much like a stationary bike that now serves as a clothing rack, shares of Peloton Interactive PTON have been mostly forgotten. The New York-based exercise equipment company has been a disaster, falling from a high of $170 in January of 2021 to below $3 as recently as August. 

Then on Thursday, on a blood-red day when the only trades that seemed to be working were on the short side, this nearly forgotten, pandemic-era name crawled from the wreckage and exploded for a 27.8% gain.

Investors are asking, can Peloton keep rolling higher, or are the wheels about to come off this stock again?

When the company reported fiscal first-quarter earnings on Thursday morning, the results were mixed. Revenues beat analysts’ estimates by 2.2%, but earnings per share were on the light side.

Worse, Peloton guided expectations lower for the current quarter, as holiday sales are anticipated to be soft.

Then things got interesting. 

Peloton raised guidance for the full year, and named Ford Motor F executive Peter Stern as its new CEO and president, effective January 2025.

What’s the trading plan for Peloton? Let’s go to the chart.

Before Friday's open, Peloton was trading at $8.34. I took a small initial position there (point A), approximately half of my normal position size.

I placed a limit order to buy the other half at $7.05 (point B). If Thursday’s large gap is filled, I’ll have my full position, at an average cost of about $7.68.

If the gap isn’t filled, that’s fine, because my initial position will either be profitable or down slightly.

Why is Stern a good fit for Peloton? He has a track record with subscription services, in fitness and elsewhere.

Stern was a co-founder of Apple Fitness, a fitness subscription service. At Ford, Stern handled subscription software services.

As of February, Peloton had 6.4 million members. Three million of those pay to sync their Peloton equipment with workout classes, and over 700,000 pay $12.99 per month for access to recorded content.

Stern’s experience makes him a good candidate to grow and maximize those memberships.

Let’s give some credit where it’s due. The current co-CEOs of Peloton, Karen Boone and Chris Buzzo, have been in charge for less than six months. During that time, Boone and Buzzo cut costs and repositioned the company, which will now have its fourth CEO in less than two years. Boone and Buzzo will remain on Peloton’s board of directors after Stern takes the helm. 

At the time of publication, Ponsi was long PTON.