Since July 2025, Peloton has been in a holding pattern, posting a small loss of 1.9% while floating around $6.58. The stock also fell short of the S&P 500’s 11.5% gain during that period.
Is now the time to buy Peloton, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free for active Edge members.
Why Do We Think Peloton Will Underperform?
We're cautious about Peloton. Here are three reasons we avoid PTON and a stock we'd rather own.
1. Decline in Connected Fitness Subscribers Points to Weak Demand
Revenue growth can be broken down into changes in price and volume (for companies like Peloton, our preferred volume metric is connected fitness subscribers). While both are important, the latter is the most critical to analyze because prices have a ceiling.
Peloton’s connected fitness subscribers came in at 2.73 million in the latest quarter, and over the last two years, averaged 3% year-on-year declines. This performance was underwhelming and implies there may be increasing competition or market saturation. It also suggests Peloton might have to lower prices or invest in product improvements to grow, factors that can hinder near-term profitability. 
2. EPS Trending Down
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
Sadly for Peloton, its EPS declined by 16.5% annually over the last five years while its revenue was flat. This tells us the company struggled because its fixed cost base made it difficult to adjust to choppy demand.
3. Mediocre Free Cash Flow Margin Limits Reinvestment Potential
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
Peloton has shown poor cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 7.6%, lousy for a consumer discretionary business.
Final Judgment
We cheer for all companies serving everyday consumers, but in the case of Peloton, we’ll be cheering from the sidelines. With its shares trailing the market in recent months, the stock trades at 45× forward P/E (or $6.58 per share). While this valuation is fair, the upside isn’t great compared to the potential downside. There are superior stocks to buy right now. We’d suggest looking at an all-weather company that owns household favorite Taco Bell.
Stocks We Would Buy Instead of Peloton
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