We recently compiled a list of the Jim Cramer’s Latest Lightning Round: 10 Stocks to Watch. In this article, we are going to take a look at where Peloton Interactive, Inc. (NASDAQ:PTON) stands against the other stocks to watch according to Jim Cramer.
The host of Mad Money, Jim Cramer, shared his insights on the persistent issue of inflation. He emphasized that companies need to lower their prices to entice consumers in today’s economic climate. Cramer pointed out the hesitation many companies exhibit in reducing prices.
Cramer said:
“Companies are so reluctant to take prices down because they don’t want to hurt their treasured gross margins but I think it may be time for a giant reset.”
While prices may have stabilized and no longer surged as they once did, Cramer warned that this does not imply they are decreasing. He believes many companies are failing to recognize the necessity for price rollbacks.
He gave a few examples from the liquor industry, where some producers have said that declining sales shifts are because of consumer preferences toward healthier lifestyles rather than acknowledging high prices.
Cramer went on to say:
“Funny enough, if you keep prices low, you can indeed make it up in volume because the consumer is a lot smarter than some of these companies are ever willing to admit.”
Cramer mentioned that both consumers and Wall Street are responding positively to companies that have opted for discounts or price reductions. He talked about the decision by McDonald’s to extend its $5 value meal, which has successfully attracted lower-income customers, and it led to an increase in its stock value.
Cramer mentioned that giants like Amazon, Costco, and Walmart have seen substantial stock gains this year. Cramer believes that businesses willing to reduce prices can compensate for their margins through increased sales volume.
Cramer speculated:
“I think we’ll look back on 2024 as the year when consumers took matters in their own hands and actually said no to inflated prices.”
He warned that companies that fail to adapt may face dire consequences, including leadership changes and plummeting stock prices. Talking about the consequences, he said:
“The result? Fired CEOs and crushed stock prices for all those who refused to heed the thunder, the thunder of those angry consumers who finally just said no to the scourge of inflation.”
Our Methodology
For this article, we compiled a list of 10 stocks that Jim Cramer talked about during the lightning rounds of his Mad Money episodes on October 1 and 2. We listed the stocks in ascending order of their hedge fund sentiment as of the second quarter, which was taken from Insider Monkey’s database of more than 900 hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A group of people in a fitness class with connected fitness products in a studio or gym.
Peloton Interactive, Inc. (NASDAQ:PTON)
Number of Hedge Fund Holders: 38
Peloton Interactive, Inc. (NASDAQ:PTON) runs a connected fitness platform. It offers a variety of fitness equipment, including the Peloton Bike, Bike+, Tread, Tread+, Guide, and Row. Cramer commented on the company, saying “…Take the loss”.
Peloton’s (NASDAQ:PTON) journey has been marked by challenges, particularly following the surge in demand during the coronavirus pandemic, which significantly raised its profile in the fitness industry. As the pandemic began to wane, the company faced a tough transition.
In its fiscal fourth quarter, it reported an operating loss of $63.3 million, which was down from the previous year’s loss of $225.8 million. Revenue for the quarter reached $643.6 million, slightly increasing from $642.1 million a year earlier.
Analysts have highlighted the company’s efforts to turn around the business. For instance, on October 1, BMO Capital maintained a Market Perform rating and a $6.50 price target on Peloton (NASDAQ:PTON). The recent discussions with the company’s management were described as “upbeat”.
The firm highlighted the efforts to balance the pursuit of sustainable profits while also focusing on avenues for growth. Conversations included topics such as new product developments, pricing strategies, and operational efficiencies, as well as the ongoing search for a new CEO and initiatives aimed at expanding the brand’s presence in the market.
On August 26, Baird analyst Jonathan Komp raised the price target on the company stock to $4.75 from $4 and kept a Neutral rating. The firm noted that fourth-quarter revenue and adjusted EBITDA exceeded expectations. Additionally, its guidance for adjusted EBITDA and free cash flow for fiscal 2025 was significantly higher than consensus estimates.
The analysts expressed optimism about the financial advantages expected from the company’s move toward profitability and the potential announcement of a new CEO in the near future.
Patient Capital Management stated the following regarding Peloton Interactive, Inc. (NASDAQ:PTON) in its first quarter 2024 investor letter:
“Peloton Interactive, Inc. (NASDAQ:PTON) declined in the first quarter, hitting its lowest per share valuation in late March since becoming a public company. The company has taken drastic action to right-size the extremely bloated cost structure, expand sales channels (Amazon, Dick’s Sporting Goods), and test other ways to reinvigorate growth. The company is hyper focused on reaching positive free cash flow generation, but the path was pushed out. We continue to believe the value of the business lives in the high-margin, sticky subscription piece of the business. We think at current valuation, the company will either successfully turn things around or be a take-out target.”
Overall PTON ranks 4th on our list of the stocks to watch according to Jim Cramer. While we acknowledge the potential of PTON as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than PTON but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Read Next: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.