Peloton (PTON 0.77%) has taken investors on a wild ride in the last few years. This mimics the up-and-down nature of the underlying business. Once on top of the world, the company is trying to get back on solid footing.

Prospective investors looking to add this high-risk business to their portfolios should take the time to understand the recent past. If you invested $1,000 in this consumer discretionary stock three years ago, you'd be sitting on a balance of $40 today, translating to a gut-wrenching loss of 96% (as of Jan. 29).

Let's take a closer look at Peloton's story before figuring out if this should be on your investing radar.

Pedaling in the wrong direction

In fiscal 2021, Peloton reported sales of over $4 billion, which was up 120% year over year. This was on top of a 100% revenue gain in fiscal 2020, demonstrating the ridiculous growth the business was experiencing during the pandemic, when consumers were stuck at home searching for ways to work out. Many other internet-based companies also benefited greatly.

But once the economy opened back up and consumer behavior somewhat normalized, Peloton was in big trouble. Demand started dropping, and losses started soaring. In fiscal 2023, revenue of $2.8 billion was 30% below just two years before. And in the last eight fiscal quarters, Peloton posted a cumulative net loss of $3.9 billion.

It doesn't help that people aren't as excited about Peloton as they were before. The member base, now at 6.4 million, is showing signs of leveling off.

The difficult struggles led to the removal of co-founder John Foley as CEO, with Barry McCarthy replacing him. We are currently two years into the latter's tenure.

Hoping for better days

The Peloton of today looks totally different from what it was three years ago. The new CEO has prioritized creating a business that relies much more heavily on subscription-based revenue, as opposed to sales of hardware, although this doesn't mean that exercise equipment isn't still an important aspect of operations.

Peloton is leaning more into an app-based strategy. Its digital workouts are what management hopes can drive top-of-funnel engagement from consumers, and that they eventually decide to pay up to buy a bike or treadmill. As of Sept. 30, there were 763,000 digital app subscribers, down 13% year over year.

Evolving into a more cost-efficient organization is also key. After laying off 12% of its workforce in late 2022, Peloton was left with less than half the number of employees it had during boom times.

As we look ahead, investors want to see a return to strong revenue gains, as well as the continuation of shrinking losses. Of course, Peloton will have to navigate an uncertain macroeconomic environment for this to happen. A recessionary scenario, which can include higher unemployment and pressured consumer spending, could derail this company.

Even if someone studies this business closely and understands everything there is to know, there is no way to figure out what Peloton will look like three years from now. And that's a concern. There are a ton of unpredictable variables that will determine if the company can get back to growth and achieve profitability, and this adds tremendous uncertainty.

Wall Street analysts don't see the company posting positive operating income anytime soon. They still expect sizable losses even as far ahead as fiscal 2026 (the furthest out the forecast goes).

Yes, the stock is cheap, as the business sells for less than its fiscal 2023 sales. But this is an extremely high-risk, speculative stock to own.