Here's Why Investors Should Retain Peloton Stock Now

Zacks Equity Research
5 min read

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Shares of Peloton Interactive, Inc. PTON have gained 28.8% in the past three months compared with the industry’s 20.5% growth. The company is making strides in its journey toward sustainable growth, evidenced by its efforts to optimize operations and enhance its product offerings. Also, the focus on software-driven enhancements bodes well. However, the discontinued Bike Rental Program poses concerns.

Growth Drivers for PTON Stock

Expanding Through Strategic Partnerships: Peloton continues to pursue partnerships that broaden its reach and foster profitable growth. A notable collaboration with Lululemon allows studio members to access Peloton content via their Mirror devices. This partnership has delivered positive results with low user churn and incremental subscription revenues. Building on its partnership success, Peloton recently entered into a multi-year content licensing deal with Google Fitbit. This agreement will offer a wide array of Peloton classes to Fitbit users in the United States, the U.K., Canada and Australia.

Focus on Hardware: In its hardware business, Peloton is committed to improving gross margins for its premium Connected Fitness products. The company has expanded its distribution through third-party channels across North America and international markets. To optimize profitability, Peloton is evaluating pricing models, discount strategies and media expenditure, with expectations of growth margin improvements in fiscal 2025.

Peloton is also witnessing substantial progress in the turnaround of Precor, its fitness equipment subsidiary. Strong year-over-year revenue growth has been driven by key product launches, including next-generation cardio consoles and new strength products. Precor has also enhanced its financial performance with improved gross margins and reduced operating expenses.

Software Innovation and Member Engagement: Peloton continues to innovate through software-driven experiences and enhanced content offerings. The company has rolled out new social features like “Find Friends” and is developing others, such as private groups and challenges. These are expected to drive member retention and organic growth. In addition, Peloton is beta testing Personalized Plans and a Strength Plus app to create tailored fitness experiences for its users. The company’s focus on instructor-led content remains central to its strategy. By introducing guest instructors and forming new entertainment partnerships with platforms like AMC+, Kindle and DIRECTV, Peloton is further enhancing the user experience.

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