Peloton (PTON) Stock Is Down: Is Now the Time To Buy?
Peloton Interactive stock is down 32 percent from its 52-week high. Why is PTON stock dropping, and is it a good stock to buy now?
April 19 2021, Published 9:00 a.m. ET
On Apr. 16, Peloton Interactive (PTON) stock fell 3.1 percent to close at $116.21, and in premarket trading on Apr. 19, it was down 5 percent. The stock has fallen after federal regulators urged consumers to stop using Peloton's Tread+ treadmill when small children or pets are around. What’s PTON’s stock forecast, and should you take advantage of the pullback?
Founded in 2012, Peloton is an exercise equipment company with headquarters in New York City. The company, which sells interactive home fitness industry products, saw demand skyrocket while gyms were closed amid the COVID-19 pandemic.
PTON stock is falling
PTON stock has fallen 32.1 percent from its 52-week high. The stock fell 7 percent in Mar. 2021 while the S&P 500 rose 4.2 percent. PTON stock plunged after CEO John Foley revealed on Mar. 18 that a child had died in an accident involving the company’s Tread+ treadmill. The rise in bond yields has also made growth stocks less appealing to investors, impacting PTON.
Peloton’s treadmill safety recall
On Apr. 17, the Consumer Product Safety Commission (or CSPC) warned consumers with small children and pets to stop using Peloton’s Tread+ product immediately. The federal regulators are pressuring the fitness company to conduct a safety recall of its $4,295 Tread+ machine after one child died and several customers were injured in Mar. 2021.
Peloton subsequently issued a press release refuting the CSPC’s claims, and said there’s no need to stop using the Tread+ machine if people follow safety instructions. The company also assured consumers and investors that it has no plans to discontinue the Tread+.
PTON's stock price
PTON’s stock price forecast
According to MarketBeat, analysts' average target price is $148.71 for PTON stock, which is 28 percent above its current price. Of the 30 analysts tracking PTON, 25 recommend “buy,” three recommend “hold,” and two recommend “sell.” Their highest target price of $200 is 72.1 percent above the stock's current price, while their lowest target of $45 is 61.3 percent below.
Truist analyst Youssef Squali has maintained his “buy” rating and target price of $160 after the CSPC warned customers. The analyst doesn't think the warning will have a significant impact on Peloton’s profit-and-loss statement.
Will PTON stock recover?
PTON stock is likely to recover, as the company is expected to capitalize on the demand for easy-to-use home fitness solutions. The global home fitness equipment market is expected to grow to $8.6 billion in 2023 from $6.8 billion in 2019. Peloton has raised its revenue outlook for fiscal 2021 due to its higher sales, to over $4 billion from $3.9 billion. The fitness company has acquired Precor to increase its manufacturing capacity.
Peloton stock looks like a good buy
Peloton's next-12-month EV-to-sales multiple is 6.8x. That valuation looks attractive compared with that of stay-at-home stocks DocuSign (DOCU) and Zoom Video Communications (ZM), which have multiples of 22.9x and 24.3x, respectively.
Investors may want to wait for more information on the Tread+ issue before trading PTON stock, which could see more volatility. It's also worth noting that recall requests from the CSPC are common in the fitness equipment market.