By most indications, fitness equipment maker Peloton Interactive (NASDAQ:PTON) wasn’t supposed to have a good year. In late 2019, the company released a now infamous commercial, featuring an already physically fit and attractive woman being gifted a Peloton Bike from her husband. You can imagine that the many folks didn’t take too kindly to the underlying message. As a result, PTON stock suffered.
And it wasn’t just a few social commentators on Twitter (NYSE:TWTR) or Facebook (NASDAQ:FB) sounding off. Rather, the outcry was so pervasive and intense that it took on a life of its own. For instance, the New York Times chronicled how critics blasted Peloton’s ad as “sexist and dystopian.” Certainly, in a modern world where equality across all categories is becoming sacrosanct, Peloton’s advertising team took a big risk.
It didn’t pan out. Later, Hollywood A-lister Ryan Reynolds’ Aviation Gin took an opportunity to brilliantly troll Peloton. In the alcoholic beverage maker’s ad, the actress behind the “Peloton wife” character, Monica Ruiz, plays a woman who appears to be getting out of a bad relationship. As is typical of Reynolds’ personality, the commercial was blisteringly biting. Of course, stakeholders of PTON stock weren’t laughing.
They also weren’t pleased when the novel coronavirus took the markets down to purgatory. However, this is where the narrative shifted for Peloton thankfully. When most states shut down their economies due to pandemic fears, there was almost no incentive to go out.
Recently, 24 Hour Fitness filed for bankruptcy. Not surprisingly, the devastation from Covid-19 was too much for the company to bear. Cynically, though, this should provide Peloton’s stock with an additional pathway for growth.
PTON Stock Is an Ideal Play for the New Normal
Over the long run, I’m very excited about the potential for Peloton. What was once a running joke on both Wall Street and Main Street now has an opportunity to benefit from the shifting landscape in personal fitness.
First, Peloton is a rare discretionary name that could benefit from a second wave of the coronavirus. In my opinion, the more severe the better for PTON stock. Although another nationwide shutdown is unlikely, consumer fears will be more than enough to keep people home. After all, we saw how quickly people adopted mitigation protocols, such as social distancing and wearing masks.
Therefore, in order for people to stay physically fit, a Peloton Bike represents the ideal platform. This segues into my second point about Peloton. Although technically belonging in the discretionary retail category, the company is really a hybrid. That’s because exercise is an essential activity, promoting several health benefits. Therefore, consumers could fork over the money for a Peloton device, even while eschewing most other purchases.
Also, whether you want to admit it or not, the pandemic hasn’t been helpful to our waistlines. According to CentreSpringMD, panic-eating comfort foods is common during periods of high stress. And it’s not just stress about finances or health, which are already overwhelming triggers. Due to exploding social unrest, many fear for the stability of this nation.
If there has ever been a time for a convenient, home-based exercise platform, this is it.
Finally, I’d like to note that the crisis has impacted lower-earning workers the most. Those who work in white-collar occupations have largely been successful in shifting their duties remotely. As such, Peloton’s prime consumer base is relatively unaffected.
Wait for a Better Deal
So, does this mean investors have the all clear to buy PTON stock? On a fundamental level, they do. But on a technical basis, prospective buyers are better off waiting.
Currently, shares are overheated. Since March 12, Peleton has jumped 152%. To be fair, it’s not dissimilar to several other momentum plays. However, much of the positive headlines have been baked into Peloton’s valuation.
I’m not suggesting that economic metrics will worsen substantially. But after a string of unexpectedly strong news — primarily, the May jobs report and U.S. retail sales for that month — probabilities suggest that the next round of headlines won’t provide as much dopamine for traders.
Therefore, stay on the sidelines for now. But when PTON stock goes on sale, be sure to pick some up. This is a company whose fortunes have turned.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now. Matt does not directly own the aforementioned securities.
