Dj Peloton Interactive Inc. Stock Underperforms Thursday When Compared To Competitors

Peloton Interactive, Inc. PTON stock has shown remarkable performance in the past three months, outpacing the S&P 500 and the industry. In the same time frame, PTON has skyrocketed 158.9% compared with the industry’s 23% rally and the S&P 500’s 8.3% rise.

As of Wednesday, the stock closed at $8.31, below its 52-week high of $8.97 but well above its 52-week low of $2.70. PTON has also outperformed other industry players like Planet Fitness, Inc. PLNT, Vista Outdoor Inc. VSTO and Acushnet Holdings Corp.’s GOLF rise of 21.3%, 13.1% and 2.2%, respectively, in the past three months.

Stock Price Performance

Momentum investing revolves around the idea of following a stock's recent trend in either direction. In the 'long' context, investors will be essentially be "buying high, but hoping to sell even higher." With this methodology, taking advantage of trends in a stock's price is key; once a stock establishes a course, it is more than likely to continue moving that way. The goal is that once a stock heads down a fixed path, it will lead to timely and profitable trades.

Even though momentum is a popular stock characteristic, it can be tough to define. Debate surrounding which are the best and worst metrics to focus on is lengthy, but the Zacks Momentum Style Score, part of the Zacks Style Scores, helps address this issue for us.

Below, we take a look at Peloton (PTON), which currently has a Momentum Style Score of A. We also discuss some of the main drivers of the Momentum Style Score, like price change and earnings estimate revisions.

It's also important to note that Style Scores work as a complement to the Zacks Rank, our stock rating system that has an impressive track record of outperformance. Peloton currently has a Zacks Rank of #2 (Buy). Our research shows that stocks rated Zacks Rank #1 (Strong Buy) and #2 (Buy) and Style Scores of A or B outperform the market over the following one-month period.

You can see the current list of Zacks #1 Rank Stocks here

Set to Beat the Market?

In order to see if PTON is a promising momentum pick, let's examine some Momentum Style elements to see if this exercise bike and treadmill company holds up.

A good momentum benchmark for a stock is to look at its short-term price activity, as this can reflect both current interest and if buyers or sellers currently have the upper hand. It's also helpful to compare a security to its industry; this can show investors the best companies in a particular area.

For PTON, shares are up 15.45% over the past week while the Zacks Leisure and Recreation Products industry is up 0.16% over the same time period. Shares are looking quite well from a longer time frame too, as the monthly price change of 81.26% compares favorably with the industry's 0.46% performance as well.

While any stock can see a spike in price, it takes a real winner to consistently outperform the market. Over the past quarter, shares of Peloton have risen 177.26%, and are up 96.47% in the last year. In comparison, the S&P 500 has only moved 13.08% and 38.58%, respectively.

Investors should also pay attention to PTON's average 20-day trading volume. Volume is a useful item in many ways, and the 20-day average establishes a good price-to-volume baseline; a rising stock with above average volume is generally a bullish sign, whereas a declining stock on above average volume is typically bearish. PTON is currently averaging 27,351,786 shares for the last 20 days.

Earnings Outlook

The Zacks Momentum Style Score also takes into account trends in estimate revisions, in addition to price changes. Please note that estimate revision trends remain at the core of Zacks Rank as well. A nice path here can help show promise, and we have recently been seeing that with PTON.

Over the past two months, 6 earnings estimates moved higher compared to none lower for the full year. These revisions helped boost PTON's consensus estimate, increasing from -$0.65 to -$0.38 in the past 60 days. Looking at the next fiscal year, 4 estimates have moved upwards while there have been no downward revisions in the same time period.

Bottom Line

Taking into account all of these elements, it should come as no surprise that PTON is a #2 (Buy) stock with a Momentum Score of A. If you've been searching for a fresh pick that's set to rise in the near-term, make sure to keep Peloton on your short list.

Zacks Investment Research

For Immediate Release

Chicago, IL – November 5, 2024 – Today, Zacks Equity Research discusses Peloton Interactive, Inc. PTON, Malibu Boats, Inc. MBUU and American Outdoor Brands, Inc. AOUT.

Industry: Leisure and Recreation

Link: https://www.zacks.com/commentary/2363151/3-stocks-positioned-for-growth-in-a-booming-leisure-industry

The Zacks Leisure and Recreation Products industry benefits from macroeconomic tailwinds, particularly the Federal Reserve's interest rate reduction. A positive fitness product sales trend, driven by growing health and fitness awareness and strong boat sales, has also been witnessed. Industry participants, who design, market, retail and distribute products for the outdoor and recreation market, are witnessing solid demand. Stocks like Peloton Interactive, Inc., Malibu Boats, Inc. and American Outdoor Brands, Inc. are likely to benefit from the trend mentioned above.

Industry Description

The Zacks Leisure and Recreation Products industry comprises companies that provide amusement and recreational products, swimming pools, marine products, golf courses, boat repair and maintenance services, and other ancillary services. The services include indoor and outdoor storage, marine, boat rentals and personal watercraft.

Some industry participants manufacture outdoor equipment and apparel for climbing, mountaineering, backpacking and skiing. A few companies also provide connected fitness products and subscriptions for multiple household users. Industry players primarily thrive on overall economic growth, which fuels consumer demand for products. The demand, highly dependent on business cycles, is driven by a healthy labor market, rising wages and growing disposable income.

3 Trends Shaping the Future of the Leisure & Recreation Products Industry

Interest Rate Cut to Aid Leisure Industry: The Federal Reserve reduced interest rates by 50 basis points to stimulate the economy and support the labor market. The Fed has kept the key interest rates at 4.75-5% and eased its monetary policy for the first time in four years. According to the Fed's Summary of Economic Projections, officials anticipate another half-point rate cut later this year, with more cuts expected in 2025 and 2026. Reduction in the interest rate is likely to aid the leisure industry.

Booming Golf Business: The golf industry has been doing exceptionally well in the past couple of years. The demand for golf equipment is rising due to advancements in technology. Innovations like adjustable hosels and aerodynamic clubhead designs are offering players more tailored and efficient options to improve their game. The game is benefiting from an increase in the participation of young people. Technology also plays a vital role in reshaping sports. India and China have become two of the most significant emerging golf markets.

Weather Disruption Hurts: The industry is highly vulnerable to changing weather conditions. For instance, demand for skiing directly depends on the amount and timing of snowfall. Swimming pool manufacturers always witness higher demand in summer. Additionally, there is a general boost in demand for outdoor and sports activities during the holiday season. Most companies in the recreational products space have specific quarters of revenue growth.

Zacks Industry Rank Indicates Bright Prospects

The Zacks Leisure and Recreation Products industry is grouped within the broader Consumer Discretionary sector.

The group's Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects.

The Leisure and Recreation Products industry currently carries a Zacks Industry Rank #68, which places it in the top 27% of more than 250 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

The industry's position in the top 50% of the Zacks-ranked industries results from the positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, analysts are gaining confidence in this group's earnings growth potential.

Before we present a few stocks from the industry that you may want to hold, let's look at the industry's recent stock market performance and valuation picture.

Industry Underperforms the S&P 500

The Zacks Leisure and Recreation Products industry underperformed the Zacks S&P 500 composite and its sector in the past year. Stocks in the industry have collectively grown 6.5% compared with the S&P 500's rise of 31.5%. The Zacks Consumer Discretionary sector has rallied 16.1% in the same time frame.

Valuation

On the basis of forward 12-month price-to-earnings, which is a commonly used multiple for valuing leisure products stocks, the industry trades at 24.48X compared with the S&P 500's 21.72X and the sector's 18.45X. In the past five years, the industry has traded as high as 44.80X and as low as 12.81X, the median being 20.39X.

3 Leisure & Recreation Products Stocks to Watch

American Outdoor Brands: Headquartered in Columbia, MO, the company supplies outdoor goods and accessories designed for adventurous individuals in the United States and globally. Its focus on innovation has strengthened relationships with consumers and retailers while broadening market reach. The company currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

American Outdoor Brands' fiscal 2025 earnings are expected to witness year-over-year growth of 59.4%. The AOUT stock has declined 3.4% in the past year.

Peloton Interactive: The company is benefiting from growth initiatives and strategic partnerships. PTON's emphasis on global expansion bodes well. Robust subscription revenues are also aiding the company.

The Zacks Rank #2 (Buy) company's loss per share in fiscal 2025 is expected to be 65 cents, whereas it reported $1.51 in the prior-year quarter. The stock has gained 44.4% in the past year.

Malibu Boats: This Loudon, TN-based company operates as a designer, manufacturer and marketer of sport boats primarily in the United States. Malibu Boats is well-positioned for a strong performance as it approaches the boat show season. The company has shown resilience in managing a tough retail environment by focusing on factors within its control, particularly through disciplined inventory management and strategic initiatives.

Its 2025 lineup has already garnered positive feedback, creating momentum for upcoming boat shows. This season provides an important chance to engage with customers, showcasing Malibu Boats' commitment to innovation and quality — key strengths that could support its growth and market position.

Shares of this Zacks Rank #2 company have gained 25.4% in the past three months. The company's fiscal 2025 earnings are expected to witness year-over-year growth of 17.7%.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

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