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Why Peloton Stock Crashed Today After Yesterday's Record High

By Jason Hall – Sep 3, 2020 at 1:05PM

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Investors are selling just about everything today.

What happened

Shares of Peloton Interactive (PTON -0.19%) are crashing hard today. As of 12:09 p.m. EDT on Thursday, shares were down over 9% after spending much of morning trading down by double digits. Today's deep sell-off comes one trading session after shares raced 8% higher, reaching an all-time high following a note from a Wall Street analyst boosting his price target for Peloton.  

Two hands with thumb up and thumb down.

Image source: Getty Images.

So what

Peloton's stock has spent much of the past several months breaking record highs, as the interactive fitness company has experienced enormous growth, increasing its digital subscriber count to 2.6 million and revenue to more than $500 million last quarter. Since going public in late 2019, shares have gained 223%; since the low point during the coronavirus-induced market crash in mid-March, shares are up an eye-popping 326%. 

PTON Chart

PTON data by YCharts.

Today's sell-off shouldn't be totally unexpected. The SPDR S&P 500 ETF Trust (SPY 1.31%), a good proxy for the broader stock market, is down almost 3% at this writing, one of the worst days for stocks in months. It's a good bet a lot of investors who've enjoyed the enormous run-up are now cashing out. The fact that most stocks are down big today supports that, especially without any specific news to explain why Peloton shares are down. 

Now what

It can be pretty hard to hold on to stocks on days like this, especially stocks that have run hard and fast like Peloton, and not lock in those gains and avoid potential losses if the bottom falls out. 

Yet while others are selling on the quick gains, other investors see Peloton as a buy now. As much as the stock has run up quickly, the fitness market is a massive industry that's somewhat ripe for the disruption offered by Peloton's combination of products and services.

If it's a quick buck and avoiding short-term losses you're after, you'll probably join today's sellers. But if you're drawn by the prospects of building long-term wealth in the years to come, you might not want to be so quick to pull the trigger and sell.

To the contrary, today -- and even if the sell-off continues in the days to come -- might be an opportunity to buy a great growth stock. One thing is certain: We will get a better idea how the growth story is playing out next week when Peloton reports quarterly results.

Jason Hall has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Peloton Interactive. The Motley Fool has a disclosure policy.

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