Peloton Stock’s Wild Ride: Why It Skyrocketed Before Crashing Today

Peloton shares just took investors on a rollercoaster—here's what fueled the surge and the inevitable comedown.

The pump: Market whispers of a potential buyout or tech pivot sent traders into a frenzy. Classic FOMO at play.

The dump: Reality bit when earnings leaked—another quarter of 'growth' built on discounts and churn. Even Wall Street's optimism has limits.

Another reminder that meme stocks burn brightest before they crash. At least the shorts made bank.

Streamlining, streamlining, streamlining

Priority No. 1 for the Peloton turnaround has been to become a streamlined version of its old self. While this has been in the works for multiple quarters (years now, even), Peloton's results for the fiscal fourth quarter, ended June 30, show that this work may be starting to pay off.

Equipment gross margin more than doubled from 8.3% to 17.6% over the last year. Meanwhile, its subscriptions segment gross margin ROSE from 68% to 72%.

With these high-margin subscription sales now accounting for two-thirds of Peloton's revenue, the company could become steadily profitable if it can reverse the persistent customer churn figures it has seen since the pandemic.

Image source: Peloton.

Still 6 million members strong -- with 2.8 million paid connected fitness subscriptions -- Peloton guided for a 6% customer churn rate for the first quarter of 2026. However, management's full-year guidance has total revenue only dipping 2% at the midpoint, signaling that there's a chance Peloton returns to sales growth this year.

Furthermore, the company expects to generate at least $200 million in FCF in 2026 -- a tidy sum for a $2.8 billion company.

Eyeing an international launch as its U.S. operations stabilize, Peloton's turnaround story is worth watching at 11 times FCF. However, with stock-based compensation equal to 10% of Peloton's market cap, I'd love to see this figure reined in before I buy.