Peloton stock price has plummeted. Is this fallen angel a good buy?

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Peloton (NASDAQ: PTON) stock price has been in a freefall in the past few months as concerns about the company’s growth and future remain. The shares crashed by more than 5% on Friday and is trading at $9.71, which is about 93% below its all-time high. Its market cap has crashed to about $3.2 billion.

Growth concerns remain

Peloton has moved from being one of the fastest-growing companies in the US into a fallen angel that is struggling to survive. Other key companies in this category are firms like WeWork, Affirm, and Lordstown Motors.

The management is now implementing a turnaround strategy they believe will save the company. In August, the company said that its revenue for the second quarter dropped by 27.57% to just $678 million while its margins declined.

Peloton also saw a small decline in the number of users. Its results showed that it had 6.9 million members, down from 7 million in the previous quarter. Also, the average monthly workouts per connected fitness subscription dropped from 18.8 to 14.8.

The biggest announcement was that the Peloton will now start selling its products in Amazon, the biggest e-commerce company in the world. Some investors believe that this was a great decision. 

However, there is a likelihood that listing Peloton bikes in Amazon will dilute its premium brand. On a positive side, the company has hinted that it is pivoting away from selling hardware to its subscription brand.

This is notable since the company’s subscription revenue is now more than its hardware sales. In the most recent quarter, its connected fitness sales were $295 million while its subscription revenue was over $383 million. 

In my view, Peloton should create value by separating its hardware and software solution. For one, its subscription business is already profitable, meaning that it can be valued highly than the combined company. 

What next for the Peloton stock price?

Peloton stock price has been in a downward trend in the past few months. During this time, the stock has moved below all moving averages which is a bearish sign. In addition, the Relative Strength Index (RSI) has moved below the neutral point at 50.

Therefore, the PTON stock price will likely continue falling as sellers target this year’s low of $8.23. A move above the resistance at $12 will invalidate the bearish view.

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