Fundamentals aren’t everything.
By their very nature, they are backwards looking. It’s made up of data from months ago that we are just now hearing about.
Sales, earnings, profit margins, growth patterns are all old data.
Price is the only current metric we have in the market. But, too many people ignore it.
The fundamentals of a stock tell us what has happened in the past. But the price action of a stock, the chart that shows what someone is willing to pay for one share at any given moment, tells us what to expect in the future.
Today, we’ll dig deeper into the popular exercise equipment maker, Peloton (Nasdaq: PTON).
We’ll look at the fundamentals and see if it is expected to hold up based on its current price action.
Quick Look at the Past
It’s no secret that Peloton bikes and treadmills were extremely popular during the pandemic as gyms closed across the country.
Looking for ways to bring the gym atmosphere to the home, Peloton was a top pick.
That’s why sales are booming. Sales more than doubled from June 2020 to March 2021.
This is a trend they’ve seen in each of the past four years, doubling sales growth.
Analyst see this activity and are jumping on the bandwagon. The stock has an average rating of “outperform” from 25 different analysts.
And mind you … the fundamentals look great.
But I always dig deeper and use the price movement to determine whether or not a stock should be on my bank it list, or tank it list.
Price Leads the Way
What we have playing out in Peloton’s share price is a classic technical formation that tells us everything we need to know about where it is headed next — a head and shoulders pattern.
It’s one of the most popular patterns because it’s so easy to spot. All you have to do is look at the price chart.
On the chart below, you can see what looks like a head resting on two shoulders with a key support line called the neckline.
This one chart tells us what to watch for in Peloton’s price.
You can see the neckline broke in late April, only to see a quick dip and rebound in May.
Now it’s at a pivotal point.
Fundamentals look great and the stock is trading 40% below its peak in January. The terms “oversold” and “value play” will come up a lot.
To get my analysis and price target for Peloton in the coming months, check out my video below.
Chad Shoop, CMT
Editor, Quick Hit Profits
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