Why Peloton Stock Shot Up 27% in April

Peloton Interactive (NASDAQ: PTON) stock soared 27% in April, according to data provided by S&P Global Market Intelligence. It benefited from an analyst maintaining a buy rating, a new deal with Spotify, and likely from retail investor momentum as it gets closer to its next earnings report on May 7.

The road to recovery

Peloton is a major name in fitness, but that hasn't translated into higher sales or sustainable profitability over the past few years. The company has gone through many challenges since it went public in 2019, from recalls to brand gaffes to lower demand when fitness enthusiasts returned to gyms after pandemic lockdowns.

Image source: Peloton.

It has cycled through several CEOs and launched new initiatives to boost sales and generate profits. It acquired fitness equipment company Precor, made deals and partnerships with hotels and universities, started selling in third-party outlets, and has tried many, many other means of getting back to growth. Some have been more successful than others, and while there have been wins along the way, the company has not managed to reignite the business.

It has been more effective in its cost-cutting, and profitability is improving.

Here are some of the fiscal 2026 second-quarter highlights:

• Paid connected fitness subscriptions decreased 7% year over year.
• Revenue was down 3% year over year.
• Gross profit improved 4% year over year.
• Net loss improved 58% year over year.
• It generated $71 million in free cash flow.

Peloton also recently announced a new deal with Spotify, which is expanding into a fitness segment, for 1,400 of its classes to become available to Spotify's subscribers.

Bargain or value trap?

UBS maintained its buy rating with an $11 price target in April, which implies more than doubling from today's price. The highest analyst price target is $20, implying a 273% increase. Lest you get too excited, the consensus target price is a more modest 21% higher than today's price.

At the current price, Peloton stock trades at a price-to-sales ratio of only 0.9. But that's not necessarily a bargain; it's just what the market thinks it's worth right now.

Analysts are looking for revenue to drop 1% in the current quarter and for earnings per share of $0.07, up from a $0.12 loss last year. It missed on EPS in two out of the last four quarters.

There is a part forward for Peloton, but the stock is only a buy for investors who have an appetite for risk right now.

Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Peloton Interactive and Spotify Technology. The Motley Fool has a disclosure policy.