Peloton (NASDAQ: PTON) Is Bouncing Hard Off Support - Watch Out Above

After spending most of 2020 enjoying the title of “best COVID stock to own this year”, shares of Peloton Interactive (NASDAQ: PTON) have spent most of 2021 learning what it’s like to trade in a more normal environment. While they’re still 300% higher than where they IPO’d in the months before the pandemic started, the stock is now down more than 40% from its all-time high. 

If you’ve been a Peloton shareholder through any of this, you’re well accustomed to the rollercoaster ride that their shares have been on. And you’ve probably wondered once or twice if it was worth throwing in the towel now that pandemic-enforced lockdowns and gym closures are fast becoming a thing of the past. Well, if you’ve decided to hold on until now, or if you’re considering getting involved and starting a position, listen up. Things look to be heating up again and we could be at the start of something big. 

Since forming a technical double bottom three weeks ago shares of the New York City headquartered exercise equipment giant are after popping 20%. Their RSI has shot up from sub 30 to 60, while their MACD has had a bullish crossover. Together, this trifecta suggests there’s some serious momentum starting to appear in shares, which could cause any existing bears to throw in the towel for the momentum, as the stock unwinds months of selling pressure. 

Bullish Comments

Investors will know a lot more in a few weeks' time after the company’s Q3 earnings are released, but for now, we have the likes of Cowen backing them in public to beat analyst expectations. They reiterated their Outperform rating on Peloton shares in a note last week, adding that "Peloton is the clear leader in the emerging connected fitness segment and is poised to expand its addressable market as awareness rises amid its expansion into new hardware & content verticals and international markets." These bullish comments came a few days after fresh market data showed strengthening trends in Peloton’s sales, a solid boost for the company to get right as we approach the crucial holiday season. And it came just a few weeks after their peers at Stifel advised shareholders to “strap in for the long haul” as the market’s focus on near-term headwinds like tightening margins and rising churn starts to dissipate.

Stifel went so far as to put a $120 price target on the stock at the time, which suggests that even after the run seen in shares over recent weeks there’s still an upside of some 25% to be had from Monday’s closing price. Their comments also struck a similar theme to what Cowen said last week. Stifel analyst Scott Devitt and his team wrote "we continue to see multiple drivers for near-term growth as Peloton invests behind the recent Bike price reduction and the reintroduced Tread. Longer-term, we see ongoing international expansion and new hardware opportunities as drivers of sustainable growth."

Getting Involved

This is all good stuff for the stock and suggests that for now at least, the current trading price does not accurately reflect the longer-term potential. The sense that shares are trading at a discount was confirmed when some of Cathie Woods’ ARK Invest funds picked up close to 80,000 of them at the end of last month. While there’s been a decent run since then and the best prices might be behind us, there are plenty of reasons to think Peloton’s stock is heading back to triple digit prices. 

They’ve had to adapt to a post COVID world quicker perhaps than they would have liked, but are doing so successfully. As Argus summed up last month, "Peloton continues to see strong demand for its products...even with broad vaccine distribution, we expect consumers to return to gyms only gradually and look for many to continue to prefer at-home workouts - especially given the rapid spread of the Delta variant."

It might be a while before we see Peloton shares at their pandemic heights again, but Wall Street appears to be becoming more and more attracted to the post-pandemic version of Peloton.