Legendary Investor David Einhorn Is Betting Big on Peloton Stock. Should You?

Peloton Interactive PTON has experienced a whirlwind journey since its 2019 IPO. With its sleek, at-home exercise equipment, Peloton became a cultural icon during the COVID-19 pandemic. Millions flocked to the platform for its immersive workout experience, pushing the stock to a record high of $171.09 in January 2021. However, Peloton’s ascent didn’t last.

As the world emerged from lockdowns and gyms reopened, the company’s momentum faltered. By May 2024, Peloton's stock hit a 52-week low of $2.70 as the company struggled with profitability and a bloated cost structure. Yet, despite its steep fall, Peloton appears to be staging an impressive comeback, winning back investor confidence with its sharpened focus on fundamentals and efficiency. New CEO Peter Stern appears poised to continue driving a leaner, more agile organization.

And the company’s efforts are already bearing fruit, with two consecutive quarters of better-than-expected financial results. The company’s efforts to streamline operations and improve efficiency are winning over the market. What’s more, Peloton’s appeal isn’t limited to retail investors. It has also caught the eye of legendary hedge fund manager David Einhorn.

Einhorn’s Greenlight Capital recently revealed that it took a new position in the fitness brand in the latter half of last year. David Einhorn’s Greenlight Capital is steering clear of the Big Tech frenzy, instead placing a bold bet on Peloton. The hedge fund boss sees untapped potential in Peloton’s loyal subscription base and its sharp focus on cost-cutting. So, with David Einhorn betting big on this fitness brand, would it be wise for investors to follow his lead?

About Peloton Interactive Stock

New York-based Peloton PTON has revolutionized the fitness world by offering expert-led classes and premium, world-class content that caters to every fitness level. Whether it’s through the Peloton Bike, Peloton Tread, or Peloton Digital, the company brings top-tier workout experiences directly to its users. Since its founding in 2012, Peloton has grown into a global fitness powerhouse, connecting millions of members in the U.S., UK, Canada, Germany, Australia, and Austria.

Presently valued at approximately $3.2 billion by market capitalization, shares of Peloton have bounced back roughly 213% from their 52-week low, fueled by a sudden wave of investor optimism. The stock has gained almost 47% over the past year, surpassing the broader S&P 500 Index during the same stretch. In fact, over the past six months alone, PTON stock has staged a remarkable performance, delivering a stunning 143% return, which vastly outshines the broader market’s 10.1% gains over the same time frame.

Even with its recent surge, Peloton’s stock remains attractively priced at just 1.18 times sales, a sharp contrast to its own five-year average of 3.87x. This gap presents an enticing opportunity for investors, hinting at a stock that’s still flying under the radar.

A Closer Look at Peloton’s Q1 Performance

After closing its fiscal 2024 on a high note, Peloton once again captured investors' attention on Oct. 31 with its fiscal 2025 Q1 earnings release, which came in better than expected. The upbeat performance sent its shares soaring more than 27% on the same day. Peloton is clearly making a comeback, generating free cash flow and inching closer to profitability as it slashes costs and refines the unit economics of its hardware.

While the company’s sales dropped slightly year over year to $586 million, it still narrowly edged past Wall Street’s forecast figure of $571.7 million. Moreover, Peloton reported a remarkable turnaround during the quarter, posting a net loss of just $900,000, or virtually breakeven on a per-share basis.

This is a significant improvement compared to the hefty net loss of $159.3 million, or $0.44 per share, during the same period the previous year. Furthermore, In Q1, the company reported a free cash flow of $10.7 million, a striking turnaround from the $83.2 million outflow in the same quarter last year.

Peloton's Q1 results also highlight the strength of its category-leading subscription business, with over 6 million loyal members, 2.9 million paid connected fitness subscribers, and 582,000 paid app subscribers. This solid foundation has generated $1.7 billion in annualized subscription revenue and a 67.8% subscription gross margin.

Looking forward to the Q2 earnings report, management anticipates total revenue to range between $640 million and $660 million, with gross margin to be somewhere around 46.5%. The company anticipates total revenue to land between $2.4 billion and $2.5 billion in fiscal 2025, while gross margin for the entire year is forecast to come in at 49%.

What Do Analysts Expect for Peloton Interactive Stock?

Despite David Einhorn’s bold bet and growing investor enthusiasm for Peloton, Wall Street is taking a more cautious stance, with a consensus “Hold” rating on the stock. Of the 19 analysts offering recommendations, three advise a “Strong Buy,” and the remaining 16 recommend a “Hold.”

Even though the stock is already trading at a premium to its average analyst price target of $8.40, the Street-high target of $20 signals 136.7% potential upside from the current price levels. 

On the date of publication, Anushka Mukherji did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

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