The Dip in Peloton Stock Is a Buy Opportunity You Shouldn’t Pass

Remote working, remote education — even remote happy hours — are trends by necessity during the novel coronavirus pandemic. To that end, add remote gym workouts, where Peloton (NASDAQ:PTON) stock is a stand-out performer.

Peloton (PTON) sign on city storefront

Source: JHVEPhoto / Shutterstock.com

Peloton is coming off a strong fiscal Q2 earnings report that should begin pushing the stock price higher. PTON stock is currently down about 24% on a year-to-date basis, which means Peloton could be attractively priced for long-term investors.

On top of that, Peloton recently won a court ruling brought by a competitor who was trying to keep the company’s popular Bike+ exercise systems out of the U.S. market.

With those tailwinds in place, is it any doubt that PTON stock has a ‘A’ grade in my Portfolio Grader these days?

Let’s work up a sweat and take a closer look at Peloton.

PTON Stock at a Glance

Peloton has been around since 2012, when it was launched with the help of a Kickstarter campaign. The fitness company is known for its high-end at-home gym equipment, including its exercise bikes, bike accessories and weights.

The company integrates web-based technology to its home workout programs to remain on the cutting edge of home gym systems. Peloton has a popular exercise app, and it produces workout videos that you can live-stream through the company’s products.

Peloton didn’t go public until September 2019, when it began trading at $19 per share. While the public offering had a slow start, PTON stock is now a big winner. Today, Peloton shares trade for more than $110.

Earnings released in early February for the fiscal second quarter showed PTON stock on a healthy track. Revenue came in at $1.06 billion versus analysts’ expectations of $1.03 billion. Its earnings per share was 18 cents versus an expected EPS of 9 cents.

Peloton announced that quarterly sales were up 128% and the company increased its outlook for the full year. It says sales should top $4 billion, up from its previous forecast of $3.9 billion.

The company said it planned to invest more than $100 million in air freight to help speed deliveries to customers. Its $420 million deal to acquire Precor, an exercise equipment manufacturer, is also expected to help along those lines.

The Precor deal is expected to close early this year, says CEO John Foley:

“Importantly, Precor has deep manufacturing in R&D expertise, which will help us bring new hardware products to market more quickly and better positioned us to serve our North American member base over time. Precor’s product portfolio and sales team will also accelerate our commercial business where we see a significant opportunity to grow Precor’s franchise while introducing the Peloton platform to an even greater number of fitness enthusiasts and channels such as hospitality, multi-unit residential buildings, corporate campuses, and colleges and universities.”

Peloton’s Tailwinds

Peloton says that investors should be able to expect slow but steady growth.

One possible obstruction to that growth seems to be safely out of the way. On. Feb. 22, a federal judge rejected a request from Icon Health & Fitness, the maker of NordicTrack exercise bikes, that sought to keep Peloton’s Bike+ line from being sold in the U.S. with its Auto Follow feature.

Auto Follow changes the resistance levels of Peloton bikes during the company’s remote fitness classes.

Icon sued Peloton in October, accusing the company of patent infringement, and wanted Peloton sales restricted while the lawsuit was being considered. But U.S. District Judge Richard Andrews ruled that Icon failed to “demonstrate a likelihood of success on the merits or irreparable harm.”

Icon and Peloton have tussled in court before, and I’m sure they’ll do it again as they compete for supremacy in the home fitness arena.

The Bottom Line

There are glimmers of hope as coronavirus cases continue to decline and vaccines are being rolled out around the world. But it’s going to be a long time for some people to be comfortable with going to a gym to sweat and breathe hard when they can get the same workout at home.

Peloton and other home fitness companies are taking advantage of the stay-at-home trend to grow their business. In hindsight, Peloton’s IPO couldn’t have been better timed.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.

Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation.


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