Peloton Interactive, Inc. (PTON) hit an all-time high on Wednesday and may complete a breakout in the next few sessions, hitting $200. The rally appears technical in nature, after a modest pullback from the 20-day simple moving average (SMA), which also marks December support near $140. Buying interest has barely budged from all-time highs between then and now, underscoring continued investor interest that could herald another year of bumper returns.
Key points to remember
- Peloton posted an all-time high on Wednesday.
- Few shareholders have sold shares so far in January.
- A confirmed break could signal a rally to $200.
- The company publishes its results on February 3.
Even so, it will be hard to match the 534% return of 2020, generated by a perfect growth storm with the closure of fitness centers, forcing the health-conscious crowd to seek at-home alternatives. Peloton’s “connected” workouts fit the bill perfectly, sparking four quarters of rapid growth. Luckily for starry-eyed investors, the company is now looking beyond the pandemic, buying commercial fitness equipment supplier Precor in December to reduce backlogs and seek new product lines.
It’s not a cheap stock, but at least Peloton is now making money, earning $0.20 per share in the quarter ending Oct. 31. The company reports its second quarter 2021 results in February, with consensus at just $0.12 per share on $1.03 billion. in earnings, which isn’t too bad after a loss of $0.20 per share in the same quarter of 2020. Remember that sellers have become aggressive after the last two quarterly reports, despite exceptionally strong results.
The Wall Street consensus on Peloton has blossomed over the past three months, with a “Strong Buy” rating based on 20 “Buys” and only three “Hold” recommendations. No analyst is recommending shareholders to close positions at this time. Price targets currently range from a low of $110 to a high of $190, while the stock is expected to open Thursday’s session $13 above the midpoint target of $154. Additional earnings may be limited to the earnings ratio, given this high placement.
Evaluation is the analytical process of determining the current (or projected) value of an asset or business. There are many techniques used to do an assessment. An analyst who assigns a value to a company looks at the direction of the company, the composition of its capital structure, prospects for future earnings, and the market value of its assets, among other measures.
Peloton Daily Chart (2019-2021)
The company went public at $27 in September 2019 and rallied to $37.02 in December. The ensuing decline broke through the March IPO opening print before hitting an all-time low of $17.70, before a strong wave of recovery that hit the previous high in April. The stock completed a cup and handle break about three weeks later, entering a powerful uptrend that peaked near $140 in mid-October.
The price action led to a rounding correction in December, when acquisition news triggered a breakout that made little headway in January. The stock pulled back in the first week of the new year and bounced off new support, in a perfect technical reversal. The upside hit the December high of $167.37 less than two points on Wednesday before pulling back and trading flat in Thursday’s pre-trade, failing to confirm the breakout.
Thursday’s ticker will be critical as former highs are where bears reload short positions. A reversal here would strengthen range resistance in the upper $160, possibly delaying the upside in the February earnings report. On the other hand, few people have taken profits so far this month, which is bullish because winners in one year are often sold the following year. As a result, it makes sense to bet with the bulls, expecting this market leader to trade above $200 in Q1.
ticker tape first appeared as part of 19th century teleprinters that printed stock symbols and numeric data to transmit trading and price information via information transmitted over a telegraph wire. The ticker today is electronic, but retains its name from the mechanical ticking that the original analog machines made and the long, narrow pieces of paper on which stock quotes were printed.
Peloton stock is testing December resistance and could break out, heading towards $200.
Disclosure: The author held no position in the aforementioned titles at the time of publication.