Very few companies' stock prices benefited more from the pandemic than exercise equipment manufacturer Peloton Interactive's (Nasdaq: PTON). Peloton has a two-pronged business model. First, the company sells customers fitness equipment in the form of exercise bikes, treadmills and rowers. Second, these customers pay a monthly membership fee to access Peloton's fitness classes, which they can view on a screen that comes with the exercise equipment. The recurring revenue stream that those monthly membership payments create is all profit margin and looks very attractive to investors. During the pandemic - with gyms closed and people locked in their homes - sales of Peloton products skyrocketed. In its fiscal 2019, the company earned $915 million in revenue. By 2021, revenue had surged to exceed $4 billion. Peloton's stock price exploded higher. Over the nine months that followed the COVID-19 outbreak in the U.S., Peloton's share price jumped 738%. But that was the peak. From there, everything has gone speeding downhill. From the January 2021 top at $167, the stock price has now collapsed to below $8 - an unfathomable 95% drop! Due to the huge decline in Peloton's share price, the market valuation (enterprise value) of Peloton has fallen from a peak of $47 billion in January 2021 to just $3 billion today. Ouch! After a drop that large, a person has to wonder... Have Peloton shares finally rolled into bargain territory? |
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