Peloton stock (NASDAQ: PTON) has declined by about 10% over the last week (five trading days), compared to the S&P 500 which was up marginally over the same period. The recent decline comes on the back of downgrades by brokerage analysts, including a long-time Peloton bull, who have cited mounting competition in the connected fitness space and inflated expectations of the company. The broader rotation out of at-home stocks into cyclical and value stock has also hurt Peloton stock, which remains down by roughly 25% year-to-date.
So will Peloton stock continue to trend lower over the coming weeks and months, or are gains looking more likely? According to the Trefis Machine Learning Engine, which identifies trends in a company’s historical stock price data, returns for Peloton stock average 8% in the next month (21 trading days) period after experiencing a 10% drop over the last five trading days. The stock is also likely to outperform the S&P 500 over the next month, with an expected return that would be 8.5% higher compared to the S&P 500.
But how would these numbers change if you are interested in holding Peloton stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning to test PTON stock chances of a rise after a fall and vice-versa. You can test the chance of recovery over different time intervals of a quarter, month, or even just one day!
IF PTON stock moved by -5% over 5 trading days, THEN over the next 21 trading days PTON stock moves an average of 8.7%, with a 62.2% probability of a positive return over this period.
Also, given a -5% movement for the stock over 5 trading days, it has historically witnessed an excess return of 8.5% compared to the S&P 500 over the next 21 trading days, with a 58.2% percent probability of a positive excess return.
Is the average return for PTON stock higher after a drop?
Consider two situations,
Case 1: Peloton Interactive stock drops by -5% or more in a week
Case 2: Peloton Interactive stock rises by 5% or more in a week
Enter your text here...
Is the average return for Peloton Interactive stock higher over the subsequent month after Case 1 or Case 2?
PTON stock fares better after Case 2, with an average return of 8.7% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an average return of 11.2% for Case 2.
In comparison, the S&P 500 has an average return of 3.1% over the next 21 trading days under Case 1, and an average return of just 0.5% for Case 2 as detailed in our dashboard that details the average return for the S&P 500 after a fall or rise.
Try the Trefis machine learning engine above to see for yourself how Peloton Interactive stock is likely to behave after any specific gain or loss over a period.
Does patience pay?
If you buy and hold Peloton Interactive stock, the expectation is over time the near-term fluctuations will cancel out, and the long-term positive trend will favor you - at least if the company is otherwise strong.
Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!
For PTON stock, the returns over the next N days after a -5% change over the last 5 trading days is detailed in the table below, along with the returns for the S&P500:
What about the average return after a rise if you wait for a while?
The average return after a rise is understandably lower than after a fall as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks - although PTON stock appears to be an exception to this general observation.
PTON’s returns over the next N days after a 5% change over the last 5 trading days is detailed in the table below, along with the returns for the S&P500: