Peloton Interactive (PTON) stock has been picking up negative momentum in recent months, now off 45.6% from its all-time highs hit back in January.
With catalysts in place, Pelton stock is quite compelling, especially for those lacking a hedge against a worsening of the COVID-19 pandemic.
The Delta wave may be nearing a peak, but the pandemic is far from over. Moreover, health experts may not be in a position to give a timeline for when the pandemic will end.
In any case, I am bullish on PTON stock, as it looks to touch down with its 52-week lows over the next few weeks. (See PTON stock charts on TipRanks)
Peloton Remains Tough to Get Behind
With recent insider selling activity, and a number of skeptical analysts, investors looking to catch the falling knife had better be ready to average down as selling pressure could easily intensify.
UBS analyst Eric Sheridan recently reiterated his Sell rating on Peloton stock, citing valuation concerns. His $70 price target on the name is a Street-low, representing 24.8% downside potential.
With shares trading at 7.4 times sales, PTON stock seems somewhat frothy. Moreso, when you consider that many people starting their own at-home gyms have already had more than enough opportunity to pick up a bike.
Still, if you view Peloton as more of a technology company and less of a maker of a commoditized good, the stock is not at all that expensive. In fact, it may even be cheap.
What Could Give Peloton a Second Wind?
Undoubtedly, Peloton could find itself suffering from continued sales pressures, as gyms reopen with or without vaccine passports.
However, the recent 20% reduction in prices of Peloton’s flagship stationary bike could offset any such sales pressures. Although the move could push Peloton stock further away from profitability, it seems prudent. Why?
Peloton isn’t just a maker of fitness equipment. It’s a technology company with a growing number of loyal subscribers.
With plans to add video games into the platform, I think it’s a mistake to underestimate just how sticky the Peloton community really is. It’s evolving into quite the ecosystem, and for that reason, investors should forgive the company for its lack of profits, or expensive valuation.
Wall Street’s Take
According to TipRanks’ consensus analyst rating, PTON stock comes in as a Moderate Buy. Out of 22 analyst ratings, there are 16 Buy recommendations, five Hold recommendations, and one Sell recommendation.
The average PTON price target is $130.10, which implies 40% upside potential.
Disclosure: Joey Frenette doesn’t own shares of any mentioned companies at the time of publication.
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