Peloton (NASDAQ: PTON) stock soared in trading yesterday as rumours circulated that sportswear giant Nike and online retail juggernaut Amazon were considering bidding for the battered fitness firm. Does it make sense for a Foolish UK investor like me to climb on board for the ride?

Reasons to buy

Despite having been a Peloton sceptic for a long time, I don’t think this company is without merit. 

Its flagship bikes are undeniably beautiful bits of kit. Like any other premium brand, I can still see some people wanting one for the image it projects. That’s regardless of how often they actually intend to use it. And a few businesses may consider that to be worth (quite a bit) more than the $10bn valuation it now trades for. 

There’s also little doubt in my mind that the industry is only likely to go from strength to strength in the years ahead. The evolution of smart health-related tech shows no signs of slowing. The influence of social media will surely play a role in pushing more people to improve their fitness too. 

The idea of a heavyweight like Amazon or Nike acquiring the company could also attract other potential suitors to the fray. Apple‘s name was bandied about when Peloton stock first began its awful slide. Having seen it now tumble 80% in one year (even after yesterday’s 21% rise), the Cupertino-based business could now throw its cap into the ring.  

Reasons to steer clear

But let’s come back down to earth for a second. 

One of my biggest gripes with Peloton as an investment is that, aside from aesthetics, I’m not seeing much to separate it from the competition. There’s no ‘moat’ here, to coin a term from Warren Buffett. The fact that Peloton has now cut the price of its equipment on multiple occasions only serves to confirm this.

It’s also a sign that the trend for more people exercising at home may be coming to an end at the same time as the pandemic. Gyms bring an element of socialisation to fitness that staring into a screen can’t. That will be the case no matter how interactive Peloton tries to make its classes.

On top of this, Peloton has already faced a lot of negative publicity as a listed company. These have ranged from the highly serious (product recalls following injuries to pets and children) to the frankly ludicrous (TV shows featuring characters having heart attacks while using its machines). That’s hardly what I like to see as a prospective investor.

So, will I buy Peloton stock today? 

It will be fascinating to see how all this plays out. Amazon clearly has sufficient clout to revitalise the company whereas Nike has arguably better knowledge of the industry. 

Then again, yesterday’s initial excitement could easily dissipate just as soon as it arrived. After all, there’s no guarantee of a bid from either business materialising. In such a scenario, I’d be left holding stock in a company with dwindling revenue and a challenging outlook. That smacks of gambling to me. And that’s not the Foolish way.

I won’t be buying Peloton stock. Instead, I’m inclined to keep my powder dry for other opportunities.

If I were to buy a sold-off share, it would probably be this one. 

The post Peloton stock just surged! Time for me to buy? appeared first on The Twelfth Magpie.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Amazon, Apple, Nike, and Peloton Interactive. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

US-listed Peloton (NASDAQ:PTON) stock fell heavily last week. Is this a great opportunity for UK investors like me to buy a lockdown winner from across the pond? Here’s my take.

Why is Peloton stock falling?

One reason is a slowdown in revenue growth. As Covid-19 restrictions have lifted, Peloton has struggled to shift as many of its premium exercise bikes as it did in 2020. Accordingly, the firm now believes Q1 sales will come in at $800m. That’s a significant miss from the $1bn expected by analysts.  

On top of this, the company has also had to deal with the fallout from the tragic death of a child who was pulled underneath one of its treadmills. In response, Peloton recalled its Tread and Tread+ products in the US. A similar recall happened in the UK after the running machines’ consoles developed a nasty habit of falling off. All this has added to company costs and potentially hurt its reputation. Investors are sweating. 

Will this continue?

Lacking a crystal ball, no one knows what will happen. However,  we do know Peloton intends to lower the cost of its once-highly-coveted bike for a second time by 20%.

While another reduction in price might attract those initially put off by the cost, it will also cause a near-term impact on earnings. That’s understandably frustrating for those already holding Peloton stock since the business only announced its first profitable quarter as a listed company in September last year.

Given the market’s obsession with what happens over the next few months rather than years, I suspect Peloton could be in for a rough ride for the rest of 2021. Bear in mind too that the S&P 500 could conceivably let off steam soon.

No matter. There are a number of other ways I can tap into the keep fit/wellness industry without buying Peloton stock. 

Better buys?

I’d be more tempted to buy shares in Gym Group. Back in May, it announced that trading since being allowed to reopen was outperforming its own expectations. Membership numbers have bounced back, suggesting that the social aspect of exercise is still important to fitness fanatics.

Another alternative would be retailer Halfords. Like Peloton, the UK company was a huge beneficiary of multiple UK lockdowns as people sought to stay fit (and sane) by getting outside on their bikes. Despite rising 122% in value over the last year, the shares still change hands for just 12 times earnings. Then again, one drawback is that riders tend not to replace their durable companions every few months. 

A third option is nutrition firm Science in Sport. Its share price has climbed almost 150% since last August. However, its small-cap status makes the stock potentially very volatile. Competition is also fierce. I think this is arguably the riskiest option of the three.

Hard pass

The fall in Peloton stock isn’t a complete surprise. We’ve seen a few UK lockdown winners drop in value as investors have piled back into battered value plays. 

The lack of consistent profits, however, is more worrying for me. Aside from aesthetics and tech, I’m still struggling to justify buying one of its machines when cheaper options still do the job. If I wouldn’t buy as a consumer, why would I buy as an investor? 

For now, Peloton stock is a hard pass for me.

The post Should I buy Peloton stock? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Peloton Interactive. The Motley Fool UK has recommended The Gym Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.