The prevalence of the internet has helped to create exciting new businesses. Just look at Peloton Interactive (PTON 1.81%) and Uber (UBER 2.39%). They are digitally enabled enterprises that leverage technology to serve their customers, selling innovative offerings.
The exercise company's shares once were a big winner, but they trade 98% below their all-time high (as of Feb. 27). Shares in the ride-hailing and delivery business are 25% off their peak, but they have climbed 126% in the past three years.
Which is the better stock to buy right now?
Image source: Getty Images.
Don't get distracted by Peloton's valuation
Since this consumer discretionary stock has gotten hammered, it's cheap. Investors can scoop up Peloton shares at a price-to-sales ratio of under 0.7. Compared to the historical average of 4.1, this represents a massive discount.
NASDAQ: PTON
Key Data Points
That setup might be enticing. I view Peloton as a value trap, however.
The company reported revenue of $656.5 million in Q2 2026 (ended Dec. 31). That figure was down 3% year over year. And it was 38% lower than the second quarter of fiscal 2021. In other words, Peloton has been a shrinking business for years now. And investors should have almost no confidence in the company at this point. The user base has also been in decline.
It's becoming strikingly clear that Peloton's potential market opportunity is extremely limited. Not many folks want to pay four-figure sums for exercise equipment. And when it comes to the digital app, it's hard to justify paying anything when there's so much free workout content on the internet.
Uber's biggest risk might be overblown
Because of my negative view on Peloton's prospects, it's no surprise that I believe Uber is the better stock to buy today. There are three reasons why.
NYSE: UBER
Key Data Points
The most obvious one is that the risk of autonomous vehicles (AV) could be overblown. The management team is bullish because Uber controls demand, with its over 200 million users giving it a direct relationship with consumers. Plus, the belief is that a hybrid model works best to handle periods of peak demand, necessitating human drivers. Dozens of AV enterprises already partner with Uber, showcasing its advantageous position.
There's also the possibility that autonomous driving technology never really finds widespread adoption and commercialization. So many hurdles still need to be cleared, particularly from technological, regulatory, and safety perspectives.
Uber's financial performance is another reason to like the stock. Its revenue and operating income are projected to rise at compound annual rates of 12.9% and 32.1%, respectively, between 2025 and 2028. There is growth potential. And the business model is very scalable.
And finally, the valuation is compelling. At a price-to-earnings ratio of 15.6, this is a smart buying opportunity.
