Key Points
Peloton stock has seen huge sell-offs since hitting a valuation high during the height of the pandemic.
The company's stock trades at heavily beaten-down levels, and recently posted an unexpected quarterly profit.
Peloton could see gains, but challenges facing the business make it unlikely to be an explosive winner.
Peloton (NASDAQ: PTON) had its initial public offering (IPO) in September 2019, and the stock has taken investors on a wild ride since its market debut. The stock had its public debut shortly before the coronavirus pandemic, whose related shelter-in-place and social-distancing conditions resulted in dramatic changes to daily life.
Peloton stock saw massive gains as pandemic-related dynamics resulted in skyrocketing demand for its in-home exercise equipment and related service packages. Unfortunately, the company's sales momentum saw a substantial drawdown as tailwinds connected to the pandemic receded. As of this writing, the company's share price is down roughly 87% over the last five years of trading.
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On the heels of continued sell-offs this year, Peloton is valued at just 1.2 times this year's expected sales. Meanwhile, the company posted an unexpected profit in the fourth quarter of its last fiscal year -- which ended June 30. Does Peloton have a path to a massive comeback and turning a $10,000 investment into $50,000 over the next five years?
Image source: Getty Images.
Could Peloton stock be one of the market's next big comeback stories?
With the quarterly results that Peloton published on Aug. 7, the company reported earnings per share of $0.05 on sales of $606.9 million. The results came in far better than the average Wall Street analyst estimates, which had actually called for a loss of $0.05 per share on revenue of roughly $579.9 million.
Peloton managed to post an unexpected shift into profitability thanks to some big cost-cutting moves, but revenue was still down roughly 5.7% year over year in fiscal Q4. The company announced $100 million in new cost-cutting moves for the current fiscal year with its latest quarterly report and said that it expects sales will decline roughly 2% annually in the current fiscal year. While it's not impossible that new business developments or unexpected catalysts could spur big returns for the stock, it seems highly unlikely that a $10,000 investment in the company will be worth $50,000 five years from now.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Peloton Interactive. The Motley Fool has a disclosure policy.