U.S. stocks have tumbled amid tariff uncertainty and growth fears. The Nasdaq Composite Index ($NASX) has fallen into a correction zone, and the S&P 500 Index ($SPX) briefly fell below the 200-day moving average on March 6. Small-cap companies, loss-making names, and penny stocks have borne the brunt of the turmoil, which is typical in market crashes.
Companies whose businesses are negatively impacted by President Donald Trump’s tariffs have also been quite volatile. And it is quite a long list of companies, as the U.S. is the world’s biggest importer, and while Trump has delayed tariffs on Canada and Mexico, the president hasn’t provided much leeway to China, with whom the country runs its biggest trade deficit.
Not many companies are immune to the trade war. However, Peloton (PTON), which is now on the verge of becoming a penny stock with its share price precariously close to $5, is one name that is not much impacted by the tariffs, at least for now. In this article, we’ll look at the investment case for the fitness equipment company and analyze whether it’s a good buy now despite the broader market turmoil.
Peloton Is Immune to Trump’s Tariffs, For Now
Amid its restructuring, Peloton stopped efforts to manufacture its own equipment and now primarily relies on Taiwan-based Rexon Industrial.
The question over tariffs popped up during Peloton’s fiscal Q2 2025 earnings call last month. Replying to the question, Peloton CFO Liz Coddington clarified that if the tariffs on Canada and Mexico go ahead as planned, Peloton “would expect to see roughly 1% impact to our Connected Fitness products, and that’s mainly related to Peloton Apparel and Precor.” Similarly, she added that the impact of the tariffs on China “is well under 1% of Connected Fitness [cost of goods sold].” The guidance assumed that Peloton would not try to mitigate the impact from tariffs.
To sum it up, since the tariffs are currently directed against China, Canada, and Mexico, which are not major sourcing destinations for Peloton, the company will experience minimal impact from current tariffs. However, Trump has vowed “reciprocal tariffs” on other countries starting next month, which, if implemented, might hurt Peloton.
Meanwhile, subscriptions now account for the bulk of Peloton’s revenues, and these sales, which are mostly from existing customers, are not impacted by the tariffs. Subscriptions are a high-margin business even as Peloton’s member growth has sagged and subscription revenues have been stagnant.
Peloton’s Turnaround Is Progressing Well
It appears that Peloton’s turnaround is finally on track. The company has turned free cash flow positive and raised its free cash flow guidance for the current fiscal year to at least $200 million. It also raised its fiscal 2025 adjusted earnings before interest taxes, depreciation, and amortization (EBITDA) guidance to between $300 million and $350 million. The company is also looking to turn the corner on top-line growth in fiscal 2026 and beyond.
PTON Stock Forecast
Of the 20 analysts covering Peloton, four have a “Strong Buy” rating while 16 rate it as a “Hold” or some equivalent. Its mean target price of $10.26 is 62% higher than the March 6 closing price, while the Street-high target price of $20 is over 220% higher than the current price.
Is Peloton Stock a Buy Now?
After the crash, Peloton’s valuations looked much more reasonable than they were at recent highs. It trades at 1.5x its expected sales over the next 12 months and under 9x its projected free cash flows over the period.
David Einhorn of Greenlight Capital, a legendary investor, also finds Peloton stock undervalued and has put money where his mouth is. His fund is now among Peloton’s top 10 investors, owning a 2.8% stake in the fitness equipment company.
All said, while I find Peloton’s valuations compelling at these levels, I am wary of buying more shares because of concerns over the broader markets. However, it is certainly be a name that I will keep on my radar and will use any further weakness to add more share of this turnaround company.
