A $10,000 Investment 5 Years Ago in This Once-Unstoppable Stock Would Be Worth $463 Today. History Says This Is What It Would Take for Investors to Double Their Money in 5 Years.
Key Points
Fiscal 2026 was the first full year that Peloton reported positive net income, but this achievement didn't prevent the stock from sliding.
The innovative fitness enterprise continues to struggle with growing its subscriber base and revenue, suggesting that this is a new reality.
Shares trade at a low price-to-sales multiple, a valuation that is justified.
Peloton Interactive (NASDAQ: PTON) was arguably the hottest business during the depths of the COVID-19 pandemic. It couldn't sell enough of its bikes and treadmills. However, that demand surge was short-lived. And shareholders have suffered.
In the past five years, this consumer discretionary stock has fallen 95% (as of Aug. 26). Had you invested $10,000 in Peloton shares back in late August 2021, you'd have less than $500 right now. The innovative fitness enterprise has been an extremely disappointing portfolio holding.
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Now that the stock is so far off its peak, opportunistic investors with a contrarian mindset might be ready to take action. History says this is what it would take for Peloton shares to double in the next five years.
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Profits did nothing to lift the stock
Peloton reported financial results for its fiscal fourth quarter on Aug. 6. For the entire fiscal year of 2026, the business collected positive net income of $63.2 million. This was the first time in its entire history that the company had achieved this.
The management team embarked on cost-cutting measures, which further trimmed unnecessary bloat. Peloton reached its goal of reducing run rate expenses by $100 million.
For what it's worth, consensus analyst estimates call for Peloton's earnings per share to rise 11.1% in fiscal 2027. Then, in fiscal 2028, the outlook calls for a 23.3% year-over-year decline. This isn't encouraging.
This business has long been a money-losing operation. So naturally, you'd assume that the stock would react positively to the company's first-ever profitable fiscal year. This wasn't the case. Shares slid 16% following the announcement of Q4 results.
Growth is the missing ingredient
It's no surprise that the market loves a good growth story. Look at Nvidia, for example, as proof that investors can't get enough of a business that's posting outsize revenue gains. This used to be the way to describe Peloton. The market rewarded its rapid expansion.
The stock hit its all-time high in January 2021. In the quarters leading up to that point, it wasn't surprising to see Peloton report 100% year-over-year revenue growth. Demand was incredible.
This means that for the share price to double over the next five years, Peloton has to get back to registering strong sales gains. Achieving a fully profitable fiscal year on the basis of generally accepted accounting principles (GAAP) isn't going to cut it. Investors want to see positive momentum.
During its best years, Peloton was expanding in remarkable fashion. It has struggled mightily to grow even a little in recent years. Revenue decreased 1.8% year over year to $2.4 billion in fiscal 2026. This was the fifth consecutive fiscal year that the top line shrank. It's no longer accurate to call this a post-pandemic slump. This disappointing reality is the new normal for Peloton.
The company's leadership team forecasts revenue of $2.3 billion to $2.4 billion in fiscal 2027. At the midpoint, this outlook calls for a 3.9% sales dip. That's not reassuring.
It doesn't help that Peloton's membership base keeps contracting. As of June 30, the business counted more than 2.5 million connected-fitness subscribers, down 9% over the previous 12 months. The concern is that this company's best days are in the rearview mirror.
Peloton's C-suite has been a game of musical chairs in recent years. These management teams have implemented various strategies to spur growth, including striking distribution partnerships, launching upgraded equipment, and integrating artificial intelligence capabilities with the workout software. Nothing has moved the needle meaningfully.
Shares trade at a price-to-sales ratio of just 1. This valuation can be a compelling entry point if you adopt the contrarian belief that the business is starting to turn things around. There is no evidence that Peloton can return to healthy user or revenue growth anytime soon, however.
Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia and Peloton Interactive. The Motley Fool has a disclosure policy.