A highly volatile stock can deliver big gains - or just as easily wipe out a portfolio if things go south.
While some investors embrace risk, mistakes can be costly for those who aren’t prepared.
Peloton’s first quarter results met Wall Street’s expectations, but the market responded negatively as sales fell and subscriber numbers continued to decline. Management attributed the quarter’s performance to lower hardware sales and a year-over-year reduction in paid Connected Fitness subscriptions, partially offset by improved unit economics and cost discipline. CEO Peter Stern described the ongoing shift towards a higher-margin, subscription-focused model, highlighting that the company achieved its fifth consecutive quarter of positive adjusted EBITDA and free cash flow. Stern noted, “We continue to track ahead of our $200 million cost restructuring plan, which is driving meaningful improvement in profitability.”
Fitness stocks witnessed a sharp sell-off this week, after a provision that would allow Americans to use pre-tax dollars from Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs) to pay for gym memberships and fitness equipment was excluded from the Senate's budget reconciliation bill.
The Russell 2000 (^RUT) is packed with potential breakout stocks, thanks to its focus on smaller companies with high growth potential.
However, smaller size also means these businesses often lack the resilience and financial flexibility of large-cap firms, making careful selection crucial.
Shares of Peloton fell despite Bank of America maintaining a Buy rating and $9.50 price target, with the firm noting “plenty of catalysts not priced into shares.”
A number of stocks fell in the afternoon session after the major indices pulled back (Nasdaq -1.3%, S&P 500 -1.1%) as Israel carried out significant strikes on Iranian nuclear and military sites, dramatically escalating fears of a broader conflict in the Middle East. This development has sent crude oil prices surging, as investors fear potential disruptions to global oil supply and a wider regional conflict.
Exercise equipment company Peloton (NASDAQ:PTON) met Wall Street’s revenue expectations in Q1 CY2025. Its non-GAAP loss of $0.04 per share was in line with analysts’ consensus estimates.
Known for its connected fitness equipment and subscription-based platform, Peloton has seen its business decline since 2021 as demand for home workouts waned.
While strong cash flow is a key indicator of stability, it doesn’t always translate to superior returns.
Some cash-heavy businesses struggle with inefficient spending, slowing demand, or weak competitive positioning.
Investors can certainly boost their returns by concentrating on stocks trading between $1 and $10.
However, a disciplined approach is necessary because many of these businesses are speculative and lack the underlying fundamentals to support their prices.
