On May 23, Peloton Interactive (PTON 1.15%) announced a long-awaited rebranding, introducing new membership tiers and presenting itself as not just an in-home exercise bike business, but a holistic fitness company for everyone. Shareholders cheered the news, and the stock is up 20% since the information became public on May 23. 

The hope of this strategic shift is to propel Peloton's turnaround efforts and get the business back to achieving solid growth again. So, is it time to buy the stock? 

Pedaling in a different direction

After looking at usage data, the management team, led by CEO Barry McCarthy, found out that more than half of all workouts performed on the platform had nothing to do with cycling. As a result, the business says it is going in a new direction, "to reflect everything Peloton has to offer to everyone, at any level, wherever they are." 

What this means is that it now has a total of five membership tiers on its digital app, compared to two before. They range from a free option all the way to the all-access membership that's solely for customers who actually own a piece of equipment.

Now, people can complete a wide variety of workouts using the apps without needing Peloton's equipment products, from the comfort of their home, a gym, or even outdoors. Some workouts are self-guided, while others have instructors.

By continuing to lean on its impressive array of instructors, high-energy classes, and music catalog, the business simply wants to create more ways for people to find and interact with the brand.

One of the immediate pros that I can think of with this strategy is that it has the potential to expand Peloton's addressable market, especially compared to just the households in the market for expensive fitness equipment. Even people early on in their wellness journey might find the free app extremely valuable. And over time, they might just "graduate" to buying a Tread or Bike+, for example.

But focusing more on Peloton's digital app, and less on its own equipment products, puts the company more directly in competition with Apple, which has its own fitness app, called Fitness+, that offers guided workouts in a range of different categories for a monthly subscription price.

Apple's advantage, as always, is that it supplements this software with hardware. In this case, the incredibly popular Apple Watch gives consumers a seamless way to track their activity and other health metrics.

Peloton's exercise equipment, while expensive, increased the chances that consumers would stick on the company's platform because they had already invested a four-figure sum. But emphasizing a digital-only approach reduces switching costs for consumers, which can boost churn metrics.

Moreover, after reading through Peloton's press release outlining its rebranding, I can't help but come away a bit confused. As mentioned earlier, there are now five different app membership tiers, with different levels of access and features. I'm sure customers will be confused as well.

Should investors buy Peloton stock?

A monster rise, boosted by the coronavirus pandemic, followed by a disastrous fall, propelled by management missteps and waning demand, have been the story for this young fitness company. Since its initial public offering in September 2019, Peloton's stock is down 65%. And it now trades at a price-to-sales multiple of just 1.1, far lower than its historical average valuation.

This might prompt some investors to take a chance on the stock because of its huge perceived upside. But don't forget that even with a rebranding that might be a win for the business, this is still very much a high-risk, high-reward investment opportunity.

Peloton is still undergoing a huge turnaround, and its long-term outlook remains very uncertain. Not to mention the fact that the company continues burning through cash on its path to hopefully being consistently profitable one day.

It's encouraging to see Peloton's latest moves, but investors should really think things through before deciding to buy shares.