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Why Is Peloton (PTON) Stock Soaring Today

December 11, 2024 at 14:08 PM EST

ⓘ This article is third-party content and does not represent the views of this site. We make no guarantees regarding its accuracy or completeness.

PTON Cover Image

What Happened?

Shares of exercise equipment company Peloton (NASDAQ: PTON) jumped 5% in the afternoon session after the major indices soared, with the Nasdaq up 1.4%, while the S&P rose 0.7% after the Bureau of Labor Statistics reported the Consumer Price Index (CPI) for November 2024 which was in-line with expectations. The CPI rose 0.3% from the previous month, while headline inflation rose 2.7% year on year, nearing the Federal Reserve's 2% target but not quite there yet. The market reaction suggests investors interpreted the report as a signal for the Fed to lower rates, reinforcing expectations of a 0.25% cut at the December 2024 meeting.

As a reminder, the driver of a stock's value is the sum of its future cash flows discounted back to today. The result of lower interest rates, all else equal, is higher stock valuations. This is especially true for higher-growth stocks, such as those in the technology sector, where the current value depends more on cash flows many years out in the future.

After the initial pop the shares cooled down to $9.98, up 4.8% from previous close.

Is now the time to buy Peloton? Access our full analysis report here, it’s free.

What The Market Is Telling Us

Peloton’s shares are extremely volatile and have had 64 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The biggest move we wrote about over the last year was 7 months ago when the stock gained 20.9% on the news that private equity firms are considering a buyout of the company. According to sources, there are discussions about cutting Peloton's operating expenses to make a potential acquisition more attractive. On May 2, 2024, Peloton announced cost optimization initiatives to reduce annual run-rate expenses by more than $200m by the end of FY'25. The plan includes reducing its global headcount by approximately 15% (400 Peloton team members).

Following the news, Barry McCarthy stepped down from his roles as CEO, President and Board Director, providing more of an opening for potential buyers as the board continues to search for his replacement.

Peloton is up 71.4% since the beginning of the year, and at $9.98 per share, it is trading close to its 52-week high of $10.34 from November 2024. Investors who bought $1,000 worth of Peloton’s shares 5 years ago would now be looking at an investment worth $311.50.

Today’s young investors won’t have read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.

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