With 'Two Weeks to Go' I'm Not Giving Up on Peloton
Here's my plan to beef up my position ahead of February 5.
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Okay, if you're in Peloton Interactive (PTON) ahead of earnings, I get it. I led you into this hole. This one has certainly, to this point, been the dog of our "Stocks Under $10" names. That said, I acknowledge that I may have made a mistake here. I am, however, not yet giving up. Not ahead of earnings on February 5 anyway. If the market reaction to those earnings does not go our way, I'm going to have to eat some crow and go into capital preservation mode.
Readers and perhaps investors may recall that just six days ago, in response to what I then saw as a breakout from a falling wedge pattern of bearish reversal ahead of those earnings, I added to my long position in the name while drawing in my price target just a bit.
This is the chart that I showed you then:
Earnings Reminder
Peloton is expected to report fiscal second-quarter financial results on February 5, so we are closing in on the "two-weeks to go" mark. Wall Street is expecting the company to post a GAAP loss per share of $0.06 on revenue of just a tad more than $675 million. This would compare quite well to the year-ago print for the same quarter of -$0.24, while producing positive annual sales growth of less than 0.2%.
This would be good for only the second quarter of positive growth for Peloton since the second quarter of FY 2022. As mentioned last week, of the 13 sell-side analysts that I know of that cover this stock, six have revised their earnings estimates for this quarter lower, while only one has revised those numbers higher. Six analysts left their projections where they were.
The Chart Has Evolved
Incredibly (at least to a nerd like me), the failed breakout can be incorporated into the falling wedge pattern that I thought had been completed. This both lengthens and broadens that pattern. In isolation, this could extend the possible breakout produced by the pattern.
Take a look:
Readers will see that the stock has given back some more ground since that piece six days ago. However, despite a less-than-spectacular reading for Relative Strength and a still bearish looking daily MACD (moving average convergence divergence), the stock has found support at the lower trendline for the pattern on four consecutive sessions. The December support at this line is very visible. Hence, I am going to add again, here close to that line to further beef up my long position ahead of February 5.
Reminder: Long-time readers know this. Stocks that trade for less than $10 are, while trading below $10, exempt from my 8% rule. They always have been.
Price Target: $8.50 (reiteration)
Pivot: 200-day simple moving average (currently $7.00)
Add: At trendline support.
Panic: Loss of the recent low ($5.96).
At the time of publication, Guilfoyle was long PTON equity.
