Peloton Jumped Today — Time to Buy the Beaten-Down Stock Hand Over Fist?


Peloton (PTON 5.71%) stock posted significant gains Monday thanks to news about recent sales and purchases of the stock made by large institutional investors. The exercise specialist’s share price ended the daily session up 5.7%, according to data from S&P Global Market Intelligence.

Morgan Stanely and Capital World Investors submitted SC 13G/A filings to the Securities and Exchange Commission (SEC) that showed their respective holdings in Peloton stock as of late December. While Morgan Stanley trimmed its holdings, Capital World Investors increased its ownership position.

Morgan Stanley’s filing showed that it had sold roughly 1.4 million shares since its last update. The company still owned roughly 38 million shares of Peloton stock and an 11.1% stake in the company as of Dec. 31.

Alternatively, Capital World Investors’ filing with the SEC showed that it had purchased approximately 1.8 million shares, bringing its position to roughly 26 million shares as of Dec. 29. The move pushed the financial services company’s stake in Peloton to roughly 7.8%. SEC Filing | Peloton Interactive, Inc. (onepeloton.com)

The key takeaway here is that Peloton appears to be retaining some support among key institutional investors despite recent struggles for the company and its stock. Morgan Stanley’s move to unload some shares looks relatively small in the scheme of things, and the purchase from Capital World meant that more Peloton shares were actually bought between the two institutional investors than sold.

Can Peloton’s beaten-down stock make a comeback?

Even with today’s gains, Peloton stock is still down roughly 65% over the last year. Even more striking, the company’s share price is down roughly 81% from market close on the day of its initial public offering (IPO) and 97% from the high that it hit when pandemic-related conditions created a “next-big-thing” buzz around the stock.

The recent indications that Peloton isn’t completely losing the support of its institutional investors are a positive sign. Admittedly, retaining support from large investors could put somewhat of a floor on its share price and help the business continue operating through stock-based compensation or new share sales. But fundamental issues with the business would still remain.

Sales fell 21.8% annually to $2.8 billion in its last fiscal year, which ended last June. Meanwhile, the company recorded an operating loss of roughly $1.2 billion in the period. The business has been making some progress trimming expenses in the current fiscal year, but the company’s midpoint guidance still calls for sales to fall roughly 3% this year.

Despite its beaten-down valuation, Peloton stock remains a speculative investment. The company still has some brand strength, and it’s possible that it could mount a meaningful turnaround or attract attention from potential acquisition suitors. On the other hand, losing money at a slower pace won’t solve the problem over the long term, and greater spending may be needed in order to return to sales growth.

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.



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