Peloton Is Surging. Is the Connected Fitness Stock Finally a Buy?

Core Viewpoint - Peloton Interactive's stock surged 35% following its latest earnings report, marking its largest one-day increase since its IPO in 2019, indicating investor optimism about a potential recovery [1]. Financial Performance - In Q4 of fiscal 2024, Peloton reported revenue of $643.6 million, a 0.2% year-over-year increase, surpassing estimates of $630.5 million, ending a prolonged revenue decline [2]. - Subscription revenue grew by 2.3% year-over-year to $431 million, primarily due to price increases, despite a decrease in paid connected fitness subscriptions and a drop in total members from 6.5 million to 6.4 million [2]. - Sales of bikes and treadmills fell by 4% to $212.1 million, but the closure of the Precor manufacturing plant improved overall gross margin by over 17 percentage points, contributing to a narrowed GAAP net loss from $241.8 million to $30.5 million [3]. - Adjusted EBITDA turned from a loss of $34.7 million in Q4 2023 to a gain of $70.3 million in Q4 2024, indicating a significant operational improvement [3]. Future Guidance - For fiscal 2025, Peloton anticipates a 9% decline in paid connected fitness subscriptions, projecting a range of 2.68 million to 2.75 million, and a similar revenue decline to between $2.4 billion and $2.5 billion [4]. - The company expects adjusted EBITDA to rise to between $200 million and $250 million, a substantial increase from $3.5 million the previous year, aided by cost-cutting measures and a new activation fee for used equipment [4]. - Peloton is still searching for a full-time CEO, which may delay the implementation of a comprehensive recovery plan [5]. Investment Considerations - While the stock's recent performance is encouraging, concerns remain about the expected revenue and subscription declines, making it difficult to fully endorse Peloton as a buy until revenue growth is achieved [6]. - The potential for continued stock gains exists if the company can exceed its 2025 guidance and demonstrate operational improvements [7].