Peloton Interactive (PTON) Hits All-Time High

Peloton Interactive, Inc. (PTON) rallied to an all-time high on Wednesday and could complete a breakout in coming sessions, lifting toward $200. The rally looks technical in nature, following a modest pullback to the 20-day simple moving average (SMA), which also marks December support near $140. Buying interest has hardly budged off all-time highs between then and now, highlighting continued investor interest that could herald another year of outstanding returns.

Even so, it will be hard to match 2020's 534% return, generated by a perfect growth storm as fitness centers closed, forcing the health-conscious crowd to seek at-home alternatives. Peloton's "connected" workouts fit the bill perfectly, setting off four quarters of rapid growth. Fortunately for starry-eyed investors, the company is now looking past the pandemic, buying commercial fitness equipment provider Precor in December to ease backlogs and research new product lines.

This is not a cheap stock, but at least Peloton is now making money, earning $0.20 per share in the quarter ending on Oct. 31. The company reports second-quarter 2021 earnings in February, with consensus at just $0.12 per share on $1.03 billion in revenue, which isn't too bad after a $0.20-per-share loss in the same quarter in 2020. Just keep in mind that sellers have become aggressive after the past two quarterly reports, despite exceptionally strong results.

Wall Street consensus on Peloton has blossomed in the past three months, with a "Strong Buy" rating based upon 20 "Buy" and just three "Hold" recommendations. No analysts are recommending that shareholders close positions at this time. Price targets currently range from a low of $110 to a Street-high $190, while the stock is set to open Thursday's session $13 above the median $154 target. Additional gains may be limited to the earnings report, given this lofty placement.

Peloton Daily Chart (2019–2021)

The company came public at $27 in September 2019 and rallied to $37.02 in December. The subsequent decline sliced through the IPO opening print in March before posting an all-time low at $17.70, ahead of a strong recovery wave that reached the prior high in April. The stock completed a cup and handle breakout about three weeks later, entering a powerful uptrend that topped out near $140 in mid-October.

Price action carved a rounded correction into December, when the acquisition news triggered a breakout that made little headway into January. The stock pulled back through the first week of the new year and bounced right at new support, in a perfect technical turnaround. The uptick mounted the December high at $167.37 by less than two points on Wednesday before pulling back and trading flat in Thursday's pre-market, failing to confirm the breakout. 

Thursday's ticker-tape will be critical because old highs are where bears reload short positions. A reversal here would reinforce range resistance in the upper $160s, perhaps delaying upside into the February earnings report. On the flip side, few folks have taken profits so far this month, which is bullish because winners in one year often get sold the next. As a result, it makes sense to bet with the bulls, expecting this market leader to trade above $200 in the first quarter. 

The Bottom Line

Peloton stock is testing December resistance and could break out, heading toward $200.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.