Peloton Jumps Today – Time to Buy a Beaten Stock.

peloton (PTON 5.71%) The stock posted a big rally on Monday, thanks to recent news of large institutional investors selling and buying the stock. Shares of the exercise specialist ended the daily session up 5.7%, according to data from S&P Global Market Intelligence.

morgan stanley and Capital World Investors filed a SC 13G/A filing with the Securities and Exchange Commission (SEC), showing that each held Peloton stock as of the end of December. While Morgan Stanley reduced its holdings, Capital World Investors increased its ownership position.

Morgan Stanley’s filing shows it has sold about 1.4 million shares since the last update. As of December 31, the company held approximately 38 million shares of Peloton stock and an 11.1% stake in the company.

Alternatively, Capital World Investors bought about 1.8 million shares, bringing it to about 26 million shares as of Dec. 29, according to an SEC filing. This brings the financial services company’s stake in Peloton to about 7.8%. SEC filing | Peloton Interactive (onepeloton.com)

The important takeaway here is that Peloton appears to maintain some support among major institutional investors despite recent difficulties for the company and its stock. Morgan Stanley’s move to offload some shares appears relatively small in the scheme of things, and the purchase from Capital World means more Peloton shares were purchased between the two institutional investors than were actually sold.

Can Peloton’s battered stock bounce back?

Even with today’s gains, Peloton stock is still down about 65% compared to last year. What’s even more surprising is that the company’s stock price is down about 81% from the market close on the day of its IPO and 97% below the high it hit when pandemic-related circumstances created the “next big thing.” There is a buzz around stocks.

The latest signs that Peloton isn’t completely losing support from institutional investors are a positive sign. Of course, retaining the support of large investors could help keep the business afloat once the stock price bottoms out somewhat and through stock-based compensation or new share sales. But the fundamental problems of the business remain.

Sales for the company’s last fiscal year, which ended in June, fell 21.8% annually to $2.8 billion. Meanwhile, the company posted an operating loss of about $1.2 billion in the period. The business has made some progress in reducing costs this fiscal year, but the company’s interim guidance still calls for a revenue decline of about 3% this year.

Despite its depressed valuation, Peloton stock still remains a speculative investment. The company still has some brand strength and is likely to make a meaningful turnaround or attract the attention of potential acquisition suitors. On the other hand, losing money at a slow rate won’t solve your problem in the long run, and you may need to spend more to get back to sales growth.