Remember when Peloton (NASDAQ: PTON) was the crown jewel of lockdown-era stocks? In early 2021, shares soared above $160, but today, it’s trading below $7.
The plunge may be the death knell for most stocks but here’s what might surprise most investors, beneath the wreckage, there are signs of a quiet but serious transformation.
Key Points
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Peloton is cutting losses and generating positive cash flow under new leadership.
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Subscriptions are becoming the core, boosting profitability.
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If growth returns or an acquirer steps in, the stock could soar.
Rapid Rise and Fall
With gyms shuttered and people trapped indoors, Peloton’s sleek bikes and immersive video classes became the go-to solution for fitness fanatics.
That momentum was explosive. By mid-2021, Peloton was trading at 12x revenues, an ambitious multiple usually reserved for fast-growing software businesses, not hardware companies.
But when the world reopened, cracks began to form.
Demand evaporated faster than anticipated.Then came the brand-crippling treadmill recall, followed by supply chain snarls, and rising interest rates. Calamity followed for shareholders, so now what?
Is there anything that can turn this around?
Can Peter Stern Turn the Ship?
Peter Stern, Peloton’s current CEO, is a former Apple VP who helped build iCloud and Apple One. Insiders say he’s razor-focused on operational discipline and brand protection.
That Apple connection is more than resume fodder. Stern’s appointment has revived speculation that Peloton could one day become an acquisition target.
Apple has long flirted with health and fitness as a growth vertical. With Peloton’s premium branding and sticky subscriptions, it wouldn’t be a stretch.
But that’s a long shot. For now, Stern is focused on making the business lean and sustainable.
The Numbers Are Getting Better
Last year was rough, there’s no two ways about it.
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Total revenue: down 4% to $2.7 billion
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Connected fitness product sales: down 12% to $992 million
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Subscription revenue: up just 2% to $1.71 billion
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Paid connected fitness subscribers: down 1%
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App subscribers: down 26%
But beneath the headline numbers, there’s a silver lining most investors miss:
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Gross margin increased from 33.1% to 44.7%
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Net loss was cut by more than half, from $1.26 billion to $552 million
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Free cash flow swung from -$470 million to just -$86 million
Even more impressive? Through the first nine months of fiscal 2025, Peloton has already generated positive $211 million in free cash flow, a milestone that could mark a turning point if sustained.
What Fiscal 2025 Is Showing
Management expects revenue to decline another 9% in 2025. But they also expect:
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Gross margin to hit 50%
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Adjusted EBITDA to soar to $350 million
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Free cash flow to remain positive
In short, Peloton is shifting from chasing growth at all costs to running a tighter, leaner business. That’s a critical pivot for a company trying to weather a multi-year downturn.
Also notable is that Peloton is seeing more users migrate from hardware to software subscriptions. These app-based services come with far higher margins and don’t require shipping $2,000 bikes across the country. If that trend continues, Peloton’s financial profile could start to resemble a software company more than a hardware maker.
Why a 3x Return Isn’t Out of the Question
It’s easy to write off Peloton. Many already have.
But that’s exactly why the upside exists.
At today’s enterprise value of just $3.1 billion, Peloton is trading at a little over 1x forward revenue. If Stern can:
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Stabilize subscriber losses
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Lean further into software margins
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Maintain positive free cash flow
… then a return to 2x or even 3x revenue multiples isn’t unrealistic. Especially if a larger player sees strategic value in Peloton’s loyal base and brand equity.
Just as quickly as it fell from grace, Peloton could bounce back, if the narrative shifts from “burning cash” to “efficient growth.”
The Bottom Line
Peloton is no longer the high-flying disruptor it once was. But that doesn’t mean it’s dead.
There’s a plausible path, albeit narrow, to recovery. And if that path is executed well, today’s beaten-down valuation could look like an absurd bargain in hindsight.
For risk-tolerant investors willing to bet on a turnaround, Peloton might just be the kind of asymmetric opportunity that makes fortunes.