How to Buy Peloton (PTON) Stock

Exercise bikes aren’t a new niche, but Peloton (NASDAQ: PTON) continues to command the home fitness space. Internet-connected fitness platform Peloton Interactive Inc. bought a competitor (Precor) and launched a new treadmill.

Peloton continues to see robust demand for its connected fitness platform and its increasing subscriber numbers continue to validate its hardware, software and content investments. But can this stock provide a tailwind for your efforts to diversify your portfolio? Let us teach you how you can add PTON to your portfolio and why the Peloton bike can make waves for a wide range of people—riders and investors alike.

How to Buy Peloton Stock

If its 4.4 million loyal members are something to go by, Peloton is expected to stay in shape thanks to its high growth, strong retention, margin expansion and efficient subscription acquisition. Follow these steps to buy PTON stock.

Step 1: Pick a Broker

You can find numerous top-of-the-line brokers to choose from and offer a similar menu of investment options. That leaves you with a ton of other factors to consider in an online broker. No single broker will satisfy all these factors, so consider all these options as you narrow down to what seems like a perfect fit for your needs:

Account Minimums

Some brokers place a minimum account requirement that you must meet to start trading. While the mandatory account minimum can skew toward $500 or more for some brokers, you can still find highly-ranked brokerages with a $0 account minimum. Check how much you can afford as an initial deposit as well as the penalty for not satisfying this requirement.

Account Fees

Account fees may eat into your trading profits, and while you can’t avoid them altogether, there’s room to cut them down. You can expect to incur a fee for transferring funds, placing trades or closing your account. The easiest way around most account fees is to choose a broker that doesn’t charge them entirely. Even so, annual fees, trading platform subscriptions and inactivity fees are not uncommon among most brokers.

Commissions

While commission charges may apply depending on your broker, most online brokers don’t charge commissions for stock trades.

Discount Broker vs. Full-Service Broker

The type of broker you prefer often comes down to the level of freedom your trading strategy accommodates. A discount broker lets you buy and sell stocks online without any human intervention while a full-service broker dedicates an individual to execute your trades. While full-service brokers are typically more expensive, the extra cost comes with the advantage of personalized investment planning services, like guidance on what stocks to buy.

Trading Platform

Check whether your broker provides an intuitive, user-friendly trading platform. Some brokers will top it up with a desktop or mobile app.

Educational Resources and Tools

If you still need a little hand-holding, educational resources and tools can help inform your investment decisions. Market analysis and insights through your broker may also be worth the extra money if you don’t have time to do your own research.

Step 2: Decide How Many Shares you Want to Buy

This is probably the easiest decision you’ll have to make since your purchasing power is often based on your budget. If you’ve funded your account with $3,000 and PTON’s current stock price is $150, you could own 20 shares of PTON stock. The level of exposure you want on a given stock will depend on your risk tolerance.

Step 3: Choose Your Order Type

Different order types may result in vastly different trading outcomes. It’s important that you understand the distinctions among the most common ones.

Bid

A bid, or the bid price, is the maximum amount of money you’re willing to pay for a single share of PTON stock.

Ask

An ask, or ask price, is the minimum amount of money you’re willing to sell your shares. Assuming PTON is priced at $140, you can set your ask price at $150. When PTON reaches $150, your sell order will execute.

Spread

The spread is the difference between your bid and ask price. If your bid for PTON is $140 and the ask price is $150, the spread is $10.

Market Order

A market order is an order to buy or sell a security immediately and it typically executes at the current best available price. This order type ensures an execution but doesn’t guarantee a specific price. 

You should place market orders during regular market hours, otherwise, they’ll execute at the next market open, which might turn out significantly lower or higher from its previous close.

Limit Order

A limit price is an order to purchase or sell a stock with a restriction on the minimum price you can receive or the maximum price you can pay. A buy limit order only executes at the set limit price or lower and a sell limit order only executes at the limit price or higher.

For instance, if you want to buy shares of PTON stock for no more than $100, you could submit a limit order for this amount and your order will only execute when the price of PTON is $100 or lower.

Stop Order

A stop order tells your brokerage to buy or sell PTON stock once its price hits the specified price, known as the stop price. Your stop order will only execute if the stock reaches the stop price. The stop price is usually set in the opposite direction an investor hopes the stock will move. It’s a way of limiting losses or protecting your gains.

Step 4: Execute Your Trade

Executing a trade simply means completing your buy or sell order for a security. Your order will only execute when it’s filled. Your order may take longer to execute if there aren’t enough shares available for the specific price, placed during extended trading hours or your limit or stop price hasn’t been reached.

Peloton Stock and History

Peloton is a fitness technology company that started on 2012. It is known for its innovative stationary bikes and interactive workout classes. The company went public 2019, capturing attention from both the fitness community and investors. Peloton changed home fitness by using advanced technology, a subscription service, and fostering a community for users. However, its journey has not been smooth. After the pandemic boom, concerns grew about sustainability and competition. This introduction will explore Peloton's stock performance and the history that shaped its path within the competitive fitness industry.

All About Peloton

Peloton is a fitness company founded in 2012. It has changed how people exercise with its connected fitness products, like stationary bikes and treadmills. Peloton has grown rapidly and altered traditional fitness through its digital subscription service. This service provides live and on-demand fitness classes. Users can workout with top instructors anytime and anywhere. Peloton has three main segments: connected fitness products, subscription services, and branded apparel. The connected products fit easily into users' routines. Subscription services offer a wide variety of classes for different fitness levels. The branded apparel allows users to look good while working out. Peloton is a leader in the fitness equipment market. It focuses on building community and motivating users to reach their fitness goals.

Peloton Stock History

Peloton Interactive, a prominent home fitness company, went public in September 2019 with an initial public offering (IPO) that did not reach its expected $8 billion valuation, indicating some skepticism from investors. Nonetheless, the situation changed significantly with the arrival of the COVID-19 pandemic, which led to an increase in demand for home fitness equipment due to lockdowns that encouraged people to work out at home. This rise in demand boosted Peloton's stock performance, with shares increasing as consumers looked for alternatives to traditional gyms.

Peloton has experienced challenges with its stock valuation despite growth, currently facing a year-to-date decline of 17.18%. This decline highlights a notable downturn due to shifting market conditions and rising competition in the home fitness industry. The company's experience demonstrates how external factors like the pandemic and changing consumer behavior can impact stock performance.

What's Next for Peloton?

Peloton is facing notable challenges in its pursuit of profitability. Analysts expect a loss of $0.24 per share for the fourth quarter of fiscal 2024, and a full-year loss estimate of $1.61 per share. These numbers underscore the difficulties Peloton is experiencing as it seeks to transition to a sustainable business model.

Analysts have mixed opinions, with a general "Hold" rating suggesting uncertainty about Peloton's recovery path. Recommendations vary significantly, from "Strong Buy" to "Strong Sell," reflecting differing views on its long-term prospects. The company’s subscription model, an essential part of its business, is experiencing challenges due to market saturation and evolving consumer behaviors.

Peloton is facing challenges due to a $1.7 billion debt refinancing issue, which raises concerns about its financial stability. As the company addresses these issues, it will need to develop strategies to improve profitability while effectively managing its debt to maintain investor confidence and support future growth.

Why Should You Buy Peloton Stock?

Investing in Peloton stock offers an opportunity in the growing fitness industry. Peloton is a leader in connected fitness. It has a strong brand and a loyal user community. This sets it apart from traditional gyms. The company has adapted well to consumer preferences, especially after the pandemic. More people now want convenient home workouts. Peloton is also expanding its product range and improving its digital content. This positions the company for future growth. By investing in Peloton, investors may benefit from its plans for market expansion and increased subscription revenue. The fitness market continues to gain momentum.

Strong Brand and Community

Peloton has created a strong brand identity linked to quality fitness experiences. It offers premium exercise bikes, treadmills, and accessories. These products are supported by a large library of on-demand and live classes, including cycling, strength training, and yoga. The company has built a close-knit community of users, which distinguishes it from competitors. Members are very engaged, enjoying features like leaderboards, virtual high-fives, and community challenges. This strong brand loyalty helps generate recurring revenue through subscriptions and creates a challenge for competitors.

Growth in Digital Fitness

The global fitness industry is shifting towards digital solutions. This trend was accelerated by the COVID-19 pandemic. Peloton leads this movement with its digital platform. It offers a convenient and flexible alternative to traditional gyms. The company has invested significantly into its digital content. It provides a wide variety of classes taught by world-class instructors. This digital focus aligns with consumer trends towards home workouts. Peloton continuously innovates and personalizes the user experience. This positions the company well for growth. As consumers prioritize convenience and flexibility, Peloton's subscriber base is likely to expand further. This will drive long-term revenue growth.

Expansion and Diversification

Peloton is working to diversify its products and expand into new markets. The company has launched lower-cost options, including the Peloton Guide for strength training and a more affordable treadmill. Peloton is also looking into wearable technology and other fitness-related products. These initiatives could create new revenue streams. Additionally, Peloton has formed strategic partnerships with streaming services and fitness brands. These partnerships help Peloton reach new audiences and enhance its ecosystem. This diversification strategy decreases reliance on core products and lowers risks. It also positions the company for future growth in a competitive market.

Considerations Before Buying Peloton Stock

Investing in Peloton stock can be attractive. The company has a strong brand and potential for growth in fitness. However, investors need to consider several factors. These include the company's financial health and operational challenges. Market competition is also important. Consumer trends will impact Peloton's long-term success. Additionally, the overall economic environment affects stock performance. As Peloton adjusts after the pandemic, staying updated on these factors can help investors make informed decisions. This alignment will support their financial goals.

Market Saturation and Competition

The at-home fitness market is becoming more competitive, impacting Peloton. More brands are entering this space, posing challenges for Peloton to maintain its market share. Competitors like Apple Fitness+, Mirror, and NordicTrack provide alternative products and services that attract similar consumers. Traditional gyms are changing as well. They are adopting hybrid models that combine in-person classes with digital offerings to keep customers. This increased competition pressures Peloton to innovate and differentiate itself. Many consumers have already invested in at-home fitness equipment during the pandemic. This may lead to market saturation and slower growth in new equipment sales. Investors should consider how Peloton intends to navigate this crowded market and maintain its competitive advantage.

Profitability and Financial Stability

Peloton has experienced impressive revenue growth. However, the company has struggled to achieve consistent profitability. Its rapid expansion, including the acquisition of Precor, has resulted in high costs. Managing supply chain disruptions and rising material costs has also impacted finances. While Peloton benefits from a strong recurring revenue stream through subscriptions, hardware sales profitability has varied. Investors should closely examine Peloton's financial health. Key areas to consider include cost management, margin maintenance, and long-term profitability. The company's performance in these aspects will be important for its sustainability as a growth stock.

Shifts in Consumer Behavior Post-Pandemic

Peloton experienced significant growth during the COVID-19 pandemic. This growth was due to circumstances that pushed people to seek alternatives to traditional gyms. As the world reopens, uncertainty surrounds the demand for Peloton’s products. Customers may return to in-person fitness experiences. This shift could lead to fewer new subscriptions and a decline in equipment sales. Investors should consider how Peloton will adapt to changing consumer behaviors. The company must find ways to continue growing in a post-pandemic market. Key factors include expanding internationally, innovating new products, and diversifying revenue streams. These elements are important for managing the risks associated with these changes.

Is Peloton Stock Right for You?

If you're thinking about investing in Peloton stock, there are a few important factors to consider. The stock is currently trading between $25 and $40, which might look appealing at first glance. However, it's important to remember that the company does not pay dividends and has experienced significant stock volatility. Over the last year, Peloton's stock has dropped by 76%, which raises concerns about the risks associated with investing in it.

Some investors might still be interested in Peloton because of its growth potential and rising number of subscribers. The company’s ability to attract and keep subscribers could suggest future revenue opportunities, which may be relevant for long-term investors.

It's important to consider Peloton's current situation in relation to your personal investment goals. Evaluate your risk tolerance and investment strategy, particularly given the company's recent performance. While there are growth opportunities with increasing subscribers, it's essential to be aware of the associated risks.

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