Is It Time to Buy Peloton Stock? Here's the Good News and the Bad News

Peloton Interactive (NASDAQ: PTON) was one of the best-performing stocks at the height of the pandemic. It soared to a record high of $163 by the end of 2020, which represented a whopping 463% gain from its initial public offering (IPO) price of $29 from just one year earlier.

Peloton's digitized at-home exercise equipment was in high demand when consumers were hit with lockdowns and social restrictions to reduce the spread of COVID-19. However, that demand quickly faded when conditions returned to normal in 2022, which decimated Peloton's revenue and resulted in enormous losses at the bottom line that threatened the company's very survival.

Peloton continues to struggle with weak demand, but the company is now profitable after dramatically cutting costs. With its stock trading 97% below its record high, could this be a good buying opportunity for investors?

Image source: Peloton Interactive.

Let's start with the bad news

Peloton generates revenue by selling stationary at-home exercise bikes, treadmills, rowing machines, and accessories, and it also sells digital subscription products for customers who want to get the most of their workouts. During the first half of the company's fiscal year 2026 (ended Dec. 31, 2025), equipment sales came in at $396 million, whereas subscription revenue was $811 million. That total revenue of $1.2 billion was down 4% compared to the year-ago period.

To make matters worse, management lowered its full-year revenue forecast for fiscal 2026 to $2.42 billion (at the midpoint of the guidance range), which would represent a 3% decline from the previous year.

For some perspective, Peloton's annual revenue peaked at $4 billion during fiscal 2021, and it has declined every year since. Investors aren't fond of shrinking businesses because they tend to destroy value over the long term, hence the 97% collapse in Peloton stock.

Plummeting equipment sales fueled the revenue declines. In the first half of fiscal 2021 (ended Dec. 31, 2020), equipment revenue was $1.47 billion, so it has fallen by a whopping 73% over the last five years. It made up the overwhelming majority of Peloton's total revenue back then, whereas now the company brings in more money from its subscription products.

On that note, Peloton's subscriber base is also gradually shrinking. As of Dec. 31, the company had 2.66 million connected fitness members, who are equipment owners paying a monthly fee to unlock virtual classes and other perks, which was down 7% year over year. This makes sense as fewer people are buying Peloton's exercise products.

The company also had 522,000 paid app subscribers, who are non-equipment owners wanting help with tracking their fitness goals, which was down 11%.

Here's the good news

When a company's revenue starts to shrink, it has to rapidly cut costs or else it risks losing a truckload of money at the bottom line. That's exactly what happened to Peloton in fiscal 2022 -- it continued growing its operating expenses while its revenue suddenly declined, resulting in a whopping $2.8 billion net loss for the year. If management didn't act quickly, the company might not have survived.

Peloton has dramatically slashed costs across the board ever since. The company's operating expenses totalled $588 million in the first half of fiscal 2026, which was down 10% from the year-ago period, and down by 56% from the first six months of fiscal 2022.

Peloton still lost $24.8 million on a generally accepted accounting principles (GAAP) basis, but the company is no longer at risk of an imminent bankruptcy. In fact, after excluding one-off and non-cash expenses like stock-based compensation, Peloton actually delivered positive earnings before interest, tax, depreciation, and amortization (EBITDA) of $199.7 million for the six-month period.

However, there is an important caveat to the current situation. Peloton will eventually run out of costs to cut, and every additional dollar it pulls out of areas like marketing will make it harder to attract new customers and grow its revenue. Therefore, if the company can't find a way to grow its sales organically from here, it might find itself with blowout losses again in the future.

Is Peloton stock a buy?

Peloton has tried to revive its sales by tapping into third-party retailers like Amazon and Dick's Sporting Goods, and it also started offering payment plans for its equipment to reduce the up-front cost, hoping this will attract lower income customers. However, these initiatives haven't been enough to drive revenue growth.

Peloton has almost $1.2 billion in cash on hand, so it has enough resources to continue experimenting with new strategies. However, the company also has $945 million in long-term debt, so it can't be too aggressive -- and these experiments will have to produce results very quickly.

With all of that said, Peloton has already had five years to prove to investors it can deliver sustainable sales growth, and it simply hasn't been able to pull it off. It's hard to believe there will be a different outcome in the near future, so I can't make the case for buying its stock right now, even though it's down 97%. This is one of those situations where a beaten-down stock isn't necessarily a cheap stock.

Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Peloton Interactive. The Motley Fool has a disclosure policy.