Should You Buy Peloton Stock After the Recent Fall?

With a YTD gain of over 250 percent, Peloton (PTON) is among the best-performing stocks this year. However, the stock was under pressure last week. Based on the closing prices on Nov. 13, Peloton stock is down over 27 percent from its 52-week highs. The stock has entered into the bear market territory. Is PTON stock a buy after the recent correction or will it fall more?

Earlier this year, Peloton lowered its standalone bike price by $350 to $1,895. You can also buy the bike by paying $49 per month.

Users can also choose a digital membership that costs $12.99 per month excluding taxes. In the company's most recent earnings report for the first quarter of fiscal 2021, Peloton said that its connected fitness subscribers rose to 1.33 million in the quarter—a YoY increase of 137 percent.

Peloton is among the so-called “stay-at-home” stocks that have benefited from the changes in consumer behavior. Since people preferred to work out at home instead of going to a gym, the demand for Peloton products surged. However, the stay-at-home trade has seen unwinding over the last week.

On Nov. 9, positive results for Pfizer’s COVID-19 vaccine candidate triggered a sell-off in stay-at-home stocks. There was a sector rotation into beaten down and value stocks. On Monday, Nov. 16, news about Moderna’s COVID-19 vaccine candidate being 95 percent effective led to a sell-off in stay-at-home stocks.

Moderna stock was trading almost 2 percent lower in early trade on Nov. 16. Broader market indices including the Dow Jones Index, the S&P 500, the Nasdaq Index, and the Russell 2000 are in the green today in early trading.

Peloton stock is trading at an NTM price-to-sales multiple of 7.1x. The multiple has come down from the all-time high of 11x that it hit in October. The stock has fallen as many expect that the demand for Peloton products won't rise as much after there's a COVID-19 vaccine.

That said, even if there's a vaccine for the coronavirus, the trend towards working out at home is likely here to stay. Peloton has built a strong franchise and brand value. The recent correction in the stock could be an opportunity to take staggered positions in the company.

You need to have a trading account to buy Peloton stock. You can buy the stock through any of the brokers including discount brokers like Robinhood.