Peloton (Nasdaq: PTON) stock price surged to the highest level since August 25 as investors bought the dip. The shares have rallied by almost 100% from its lowest level this year, giving it a market cap of over $3.8 billion.

Is PTON a good buy?

Peloton share price has staged a strong comeback in the past few weeks as investors bought the dip in technology stocks. Still, the shares remain about 93% from its all-time high. At its peak, Peloton was valued at more than $40 billion.

Peloton stock crashed as investors worried about the company’s slow growth and lack of profitability. Some market participants warned about the company’s new model, which includes selling on Amazon and other retailers.

The most recent results showed that the number of connected fitness subscriptions rose slightly to 2.97 million from the previous 2.966 million. Its connected fitness products revenue crashed to $204.2 million while its subscription revenue rose to $412 million. Its loss increased from $376 million to over $408 million while its free cash flow was minus $246 million, as we wrote here.

Peloton stock price rose after recent data pointed to strong exercise equipment sales during the ongoing holiday shopping. Data by Adobe showed that the category’s sales surged by 200% from the same period last year. Recent data also showed that its bikes were top sellers on Amazon.

Further, the shares have rallied as investors continue believing that it is a bargain since it has crashed in the past few months. Besides, America’s inflation has stabilised and the Fed has hinted that it will start pivoting, as I wrote in this article.

Still, Peloton shares face significant challenges ahead. For example, its important subscription revenue growth is expected to start slowing. Also, while the stock has plummeted, it remains overalued since its path to profitability remains uncertain.

Peloton stock price forecast

(Click on image to enlarge)

Peloton stock chart by TradingView

The 4H chart shows that the PTON stock price has been in a slow recovery in the past few weeks. In this period, it has more than doubled from its lowest point this year. It has moved above the 25-day and 50-day moving averages. The Relative Strength Index (RSI) has moved to the overbought level. 

Peloton has also formed a rounded bottom pattern, which is a bullish sign. Therefore, more upside will be confirmed if the stock manages to move above the important resistance at $14.3. If this happens, it will likely rise to about $20.

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