How To Buy Peloton Stock: Working out used to be a costly, time-consuming chore. You joined a gym and committed to years of monthly membership dues, or you invested in expensive equipment for your home that – likely as not – collected dust.
A new crop of no-frills fitness centers have developed affordable memberships that are easy to cancel, but that doesn’t resolve all of the obstacles. Carving out time to go to the gym in the midst of managing professional and family responsibilities is still a challenge.
The founders of Peloton knew there had to be a better way. Their goal was to recreate the community feel and professional support of boutique fitness centers inside the home. Through a combination of advanced hardware and state-of-the-art technology, Peloton has succeeded. Today, the company offers home gym equipment that connects users to world-class instructors and like-minded peers in a fully-immersive home workout experience.
Fitness enthusiasts were quick to get on board, and investors followed. However, the company has had some ups and downs in recent months. Is Peloton stock still a buy? And if so, how can new investors begin trading right away?
Hop on the Peloton Stock Ride
The 2019 holiday season was a big one for Peloton. The company’s home fitness equipment was at the top of many wish lists, driving year-over-year revenue growth of 77 percent.
Peloton closed out 2019 with revenues of $466 million, thanks to a total of 712,005 subscribers. That figure represents an increase of 96 percent as compared to the close of 2018.
Despite these strong results, Peloton shares dropped sharply after the quarterly earnings report was released on February 5th. In fact, by the end of the month, stock prices were down by a discouraging 17 percent. This appears to be a response to the company’s guidance for the upcoming quarter, which didn’t quite measure up to analysts’ expectations.
Specifically, business leaders projected revenue growth of just 50 percent for the next quarter, which seemed like a big drop after achieving 77 percent growth. The company estimated that subscriber growth would remain high at 85 percent, but that wasn’t enough to prevent a sell-off.
Is Peloton Stock a Buy?
Most experienced analysts and market experts indicate that shedding Peloton shares after these lower-than-expected projections is short-sighted – particularly when you take a closer look at how the business calculates its financial results.
Peloton recognizes revenue when orders are delivered. During the 2018 holiday season, demand was so high that the company couldn’t keep up. A number of deliveries were pushed to the following quarter, inflating revenues for the January – March 2019 period.
Over the course of 2019, Peloton retooled its delivery process, increasing efficiency and getting machines out more quickly. Therefore, 2019 holiday orders arrived – and revenues were counted – for the October – December 2019 period. Comparing January – March 2020 to January – March 2019 does show a decline in revenue, but upon closer inspection, it is clear that the decline is not related to slowing demand.
More importantly, despite reduced projections for the January – March 2020 quarter, business leaders have raised their full-year guidance. The company has indicated that it expects total revenues to come in between $1.53 billion and $1.55 billion – a year-over-year increase of 68 percent. Previously, Peloton leadership called for revenues to increase by just 61 percent.
In addition, subscriber growth is expected to remain robust, with totals between 920,000 and 930,000 by the end of the fiscal year. Those figures represent a year-over-year increase of 81 percent and an improvement over previous guidance. During the last earnings call, business leaders projected subscriber growth of 74 percent for fiscal 2020.
Overall, that means investors can feel confident that despite the recent drop in share price, Peloton is on a solid growth trajectory, making this stock a buy. However, no investment is risk-free, and Peloton is not immune to changes in the marketplace.
Risks of Buying Peloton Stock
The truth is that Peloton stock isn’t a good bet for short-term investors. There are indications that the market is on the verge of a substantial decline, and the home fitness industry is likely to decline with it.
Further, the company is not generating profit quite yet, so there may be no immediate benefits for current shareholders.
In its most recent earnings call, business leaders indicated that they expect to achieve profitability by 2023, so investors looking for income right away are best served by choosing alternative options.
With that said, investors who are looking for long-term additions to their portfolios have an opportunity to get Peloton stock at discounted prices when they buy today. As the company grows in coming years, those who invest now will be on board to benefit from increased share value and eventual profitability.
Open a Brokerage Account
Building an investment portfolio has never been easier. Gone are the days of high minimum balances and steep trading fees. Today, a variety of reputable online brokerage firms make it possible to open and fund an account in minutes. Online brokerages take the middleman out of the trading equation.
You don’t have to pay commissions, because you are in charge of your trades. The internet offers extensive research tools, and many new investors have found success through self-directed accounts.
Whether you are planning to buy and hold Peloton shares, or you are considering more sophisticated transactions like generating options income by selling covered calls, tastyworks offers an affordable solution for independent investors. Among other benefits, tastyworks clients pay no commissions on stock trades, though clearing fees still apply.
Place a Buy Peloton Stock Order
Once your brokerage account is open, you can fund it electronically by connecting an account from another financial institution. Note that it may take a bit of time for your initial deposit to clear. When the funds are available, you are ready to trade. Simply enter the number of shares you want, and choose the type of order that best meets your needs.
The two most common types of orders include market orders and limit orders. Market orders direct the brokerage to make the trade as soon as possible, with the understanding that share prices may change in the period between your placement of the order and its execution.
Limit orders offer a bit more protection if you aren’t willing to risk a sudden price increase. When you place limit orders, you specify the highest price you are willing to pay for the stock. If share prices exceed that amount when the brokerage is ready to place your order, the transaction is cancelled.
It’s an exciting time to be an investor. A wide variety of startups are disrupting established industries and creating substantial profits along the way. Peloton has many of the characteristics of a startup that is poised to make it big, and most analysts have rated it a solid buy.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.