May was an eventful month for exercise equipment and services specialist Peloton Interactive (PTON +1.24%). The company's stock, beaten down considerably on declines in its all-important subscriber count and a clutch of bottom-line losses, staged a comeback in May. It rose by more than 17% that month, on the back of a flip into profitability in its latest quarter, and other positive factors such as its inclusion on an important stock index.
Shaping up?
The first major newsworthy event in May for Peloton was the release of its fiscal third-quarter 2026 figures. For the period, the company boosted revenue by 1% year over year to $631 million. Net income under generally accepted accounting principles (GAAP) came in at over $26 million ($0.06 per share), quite a dramatic change from the year-ago loss of nearly $48 million.
Image source: Getty Images.
That meant a mixed quarter for Peloton, as it handily beat the consensus analyst estimate of just under $619 million. It barely missed on the bottom line; meanwhile, as those pundits were collectively predicting GAAP net income of $0.07 per share.
The news behind the numbers was mixed, too. Yes, the company managed to improve its revenue (if modestly) and land convincingly in the black on the bottom line. It also slightly raised the low end of its full-year revenue guidance range to $2.42 billion from $2.4 billion (the high end remains $2.44 billion). However, its count of connected fitness subscriptions fell again, by nearly 8% to 2.66 million.
Several analysts tweaked their takes on Peloton after earnings were released, and they were clearly more impressed by the positives than discouraged by the negatives. Influential investment bank Goldman Sachs added $1 to its price target on the stock, to $8, and maintained its buy recommendation. Later in the month, big bank Citigroup made a similar move, pushing its price target to $6 per share from $5. It kept its neutral rating intact.
NASDAQ: PTON
Key Data Points
Indexed
On May 21, Peloton was tapped to become a component stock of the S&P SmallCap 600 index, replacing Enviri, effective May 27. That helped to give Peloton a late-in-the-month lift, not least because getting included in such a lineup makes a stock a good target for the many index funds that trawl the market looking for portfolio candidates.
Aping its more successful users, Peloton as a company has slimmed down and become a leaner operation, which is one reason its bottom line looked so much better in the third quarter. If I were an investor, though, I'd be concerned about the continued erosion of subscriptions, since that indicates not every aspect of its business is in prime shape. Given that, I wouldn't be buying this stock now.
