Peloton Interactive, Inc. is a New York City-based American company specializing in exercise equipment and media. Their products, including stationary bicycles, treadmills, and indoor rowers, feature Internet-connected touch screens streaming live and on-demand fitness classes through a subscription service. The equipment is equipped with built-in sensors that track metrics like power output, offering users real-time performance feedback and leaderboard rankings for friendly competition.
To access Peloton’s classes and additional features on their exercise equipment, there’s a monthly membership fee of $44. For users who only access content through the app or website, the fee is $12.99.
On September 26, 2019, Peloton went public through an initial public offering (IPO), raising $1.16 billion and achieving a valuation of $8.1 billion. However, in January 2021, the company’s market valuation peaked at $50 billion but dropped back to around $8 billion by April 2022.
If you’re considering investing in Peloton, there are two primary approaches: you can either purchase the stock directly or invest in ETFs. This guide will provide you with all the information you need to get started.
How to Buy Peloton (PTON) Stock
Step 1: Open a Brokerage Account
To invest in Peloton stock, you need to open a brokerage account. If you don’t have one, you can check out our curated list of the best online brokers to help you start your search.
Many brokers now offer fee-free stock trading, but be sure to review any potential fees and account minimums. Consider your investment goals, as they will guide the type of account you need.
- For long-term retirement savings, consider a Roth for tax advantages. If you’ve held your Roth IRA for at least five years, you can withdraw money without paying taxes or penalties. Unlike a Traditional IRA, a Roth IRA doesn’t have mandatory minimum withdrawals.
- If you’re saving for general goals like building wealth or a home down payment, a taxable investment account might be a more viable option. Unlike an IRA or a 401(k), you can withdraw your money at any time, for any reason, with no tax or penalty from a brokerage account.
Step 2: Research Peloton’s Fundamentals
An informed investor is a successful investor. Before purchasing Peloton stock, dedicate time to research its financials and historical performance. This step equips you with insights into the company’s operations, growth plans, and financial stability. Key aspects to consider include:
SEC Filings: Peloton, as a publicly traded company, is obligated to file annual and quarterly statements with the U.S. Securities and Exchange Commission (SEC). These documents offer a comprehensive view of the company’s financial health and performance. You can access these reports on Peloton’s investor relations page or on SEC.gov.
Analyst Reports: Complement your research with analyst reports and insights available through your brokerage’s research resources. These reports often provide expert analysis and market predictions, which can facilitate your decision-making process.
Step 3: Decide How Much to Invest
Before you start investing in Peloton stock, set your investment budget. The amount of money you invest is typically determined by the following factors:
- Portfolio Integration: Consider how much of your portfolio you want to tie to Peloton’s business. performance. Experts suggest limiting exposure to individual stocks like Peloton to a maximum of 5% of your total portfolio.
- Financial Goals: Make sure your investment doesn’t interfere with your monthly expenses, emergency funds, and retirement savings. At the top of your priority list should be an emergency fund. Experts suggest aiming for three to six months’ worth of expenses.
- Budget: If you can’t afford a whole Peloton share, you might consider buying a fractional share, which is a portion of a share. Many brokers now provide the option to purchase fractional shares of individual stocks.
- Investment Strategy: Decide between lump-sum purchase or regular investments using dollar-cost averaging. Dollar-cost averaging can lower investment risk but may not lead to outsized returns.
Lastly, think about when you’ll need the money for your Peloton investment. In general, stock market investments should have a time frame of five years or more. So, view Peloton as a long-term investment and only use money that you won’t need in the near future.
Step 4: Place an Order
Once you’ve determined your investment amount, it’s time to buy Peloton stock:
- Log In: Access your brokerage account.
- Enter Ticker Symbol: Peloton’s ticker symbol is PTON. Enter it to locate the stock.
- Quantity or Dollar Amount: Specify the number of Peloton shares you want to buy or the dollar amount you intend to invest.
- Order Type: Most brokerages offer market orders and limit orders. Market orders execute immediately at the current market price, while limit orders only execute when the stock reaches a specific price you set. Your choice depends on your risk tolerance and market expectations.
Keep in mind that Peloton is traded on the Nasdaq stock exchange, with trading hours typically from 9:30 a.m. to 4:30 p.m. ET, Monday through Friday. Some brokerages offer extended pre- and after-market trading hours.
Step 5: Monitor Your Investment
To effectively manage your investments, set up a routine to review your portfolio’s performance:
- Schedule regular check-ins, whether monthly, quarterly, or annually, to ensure the company continues moving in a positive direction.
- Compare Peloton’s performance to broader market benchmarks like the S&P 500 and Nasdaq Composite Index to gauge how it fares in the broader market context.
- Watch Peloton’s financial data in its public filings to assess how the company handles its finances over time.
How to Sell Peloton Stock
When the time comes to sell your Peloton shares, the process is straightforward:
- Log In: Access your brokerage account.
- Enter Ticker Symbol: Locate Peloton’s stock symbol, PTON.
- Quantity or Dollar Amount: Specify the number of Peloton shares you want to sell or the dollar amount you wish to liquidate.
- Order Type: Similar to buying, choose between market orders and limit orders based on your preferences and market conditions. Market orders execute immediately at the prevailing market price, while limit orders only execute when the stock reaches your specified price.
If you anticipate significant profits from selling Peloton stock, consult a tax professional to develop a strategy for managing capital gains taxes.
Other Investment Options
Investing in individual stocks like Peloton can be enticing, but it’s essential to recognize the inherent risks. To diversify your portfolio and mitigate risk, consider alternative investment options:
1. Index Funds: Consider investing in index funds that track broader market indices like the S&P 500 or Nasdaq. These funds include a diversified basket of stocks, including Peloton. By investing in an index fund, you indirectly own Peloton shares along with a mix of other stocks, reducing the impact of Peloton’s price swings on your portfolio.
2. Exchange-Traded Funds (ETFs): ETFs are investment funds that hold a diversified portfolio of assets, including stocks. Many ETFs, such as Invesco FTSE RAFI US 1500 Small-Mid ETF (PRFZ), include Peloton in their holdings, allowing you to invest indirectly in the company.
3. Mutual Funds: Mutual funds are professionally managed investment pools that offer diversification by investing in a wide range of assets, including stocks. Some mutual funds such as Fidelity Series Large Cap Growth Index Fund (FHOFX), have exposure to Peloton, helping you spread risk across multiple investments.
Learn more: Best Investment Options
