Should You Buy Peloton Stock in September With $10,000 and Hold for 10 Years?

Key Points

• Peloton’s leadership team plans to cut another $100 million in expenses this fiscal year.

• Peloton’s subscriber base is shrinking, leading to an ongoing decline in revenue.

• Peloton stock trades at a bargain price-to-sales ratio of 1.2, but it isn’t a smart buying opportunity.

• 10 stocks we like better than Peloton Interactive ›

Peloton Interactive (NASDAQ: PTON) will be remembered as one of the biggest beneficiaries of the COVID-19 pandemic. Its shares skyrocketed 550% from their public debut in September 2019 to their peak in January 2021. Households were rushing to buy the company's bikes and treadmills to work out at home, leading to surging sales.

It has been a challenging business since those days. Shares trade 95% below their record (as of Sept. 18), but investors are warming up to the company again. Should you buy this consumer discretionary stock in September with $10,000 and hold it for 10 years?

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Image source: Peloton.

Drastically cutting costs

During the most recent fiscal year (2025, ended June 30), Peloton reported a net loss of $118.9 million. That was a huge improvement from the net loss of $551.9 million in the year before. But what really stood out was Q4's positive net income of $21.6 million. The market was expecting another loss, so this was a pleasant surprise.

Management has drastically slashed costs across the board, in key areas like sales and marketing, and research and development. The business was able to reduce expenses by at least $200 million in fiscal 2025, which helped the bottom-line figure. And the goal is to cut costs by $100 million in fiscal 2026. This will involve laying off some employees.

Another positive trend is the cleaner balance sheet. Peloton's net debt was almost cut in half in the last 12 months. It's now at $459 million. These are major improvements from the troubled financial situation the business was in three years ago, following the short-lived pandemic surge.

Peloton's growth problem

The market has been pleased with Peloton's ability to stop losing money. A company can only reduce its expenses so much, though. In Peloton's case, what really matters over the next 10 years is whether or not the business can return to growth. That seems like a difficult task.

As of June 30, Peloton had 2.8 million connected fitness subscribers, or those customers who own a piece of equipment and pay monthly for the virtual content. This number has been declining in recent years; it's down from nearly 3 million exactly two years ago.

Investors shouldn't be surprised that revenue, which fell 6% year over year, has also been under immense pressure. The bright spot is that Peloton has completely shifted its sales mix to a bigger focus on subscriptions, a high-margin and recurring moneymaker. However, the company is struggling mightily to drum up demand for its expensive fitness equipment.

Peloton has made moves to reach a wider audience. It partners with Amazon, Dick's Sporting Goods, and Costco to sell its products. It plans to expand its "micro-store" retail format while also scaling its pre-owned marketplace across the country. And although Peloton is known as a leader in digital fitness, it wants to host more in-person events with its popular instructors. This could raise brand awareness.

According to consensus analyst estimates, Peloton's revenue is expected to increase by just 1% in total over the next three fiscal years. There isn't much for investors to get excited about here.

High-risk, uncertain reward

Peloton's newfound profitability is an exciting development for the company. And this has driven shares higher by 73% in the last 12 months. Even after such a huge gain, the valuation is historically cheap, with the stock trading at a price-to-sales ratio of 1.2.

Investors shouldn't rush in just yet, though. It's best to practice caution. Peloton needs to return to growth; otherwise, it's not going to be a good investment over a decade-long time horizon. More subscribers will bring in more revenue, which will result in greater earnings potential down the road. This still seems like a low-probability outcome.

Investors are better off avoiding the business. It's not a smart bet to make in September with $10,000.

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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Costco Wholesale, and Peloton Interactive. The Motley Fool has a disclosure policy.