Down 42%, Where Will Peloton Stock Land at the End of 2024?

Peloton (NASDAQ: PTON) is one of the worst-performing, hyped-up stocks in recent memory. The connected fitness provider that sells exercise bikes, treadmills, and workout subscriptions is off 98% from all-time highs, meaning every $100 invested at the peak is worth just $2 today. After seeing a boom in demand during the pandemic's height, Peloton has struggled to retain subscribers, generate a profit, and manage its balance sheet.

In 2024 alone, the stock is off 42%. Is now the time to finally buy the dip on Peloton stock? Here's where the once high flyer may land at the end of 2024.

Running to stay in place

With the stock down in the dumps, it's unsurprising to see Peloton struggling to be profitable. Over the first nine months of the fiscal year ending this summer, Peloton has posted a net loss of $512 million on just $2 billion in revenue. While this is an improvement versus a loss of $1 billion over the same period in the prior fiscal year, burning $500 million is no way to run a business -- especially one that cannot grow.

Last quarter, Peloton had 6.6 million total members, down from 6.7 million a year ago. Paid application subscribers are just 674,000, and declining by 21% year over year. Even though Peloton spent $547 million on sales and marketing over the last nine months, it has continued to hemorrhage subscribers. Subscriptions are how Peloton makes money and are an important metric for investors to track.

The future indications look even worse. Instructors are the lifeblood of Peloton's online fitness offering, and some popular instructors are now leaving the platform. It's likely that Peloton is unable to afford these instructors anymore, given how unprofitable its business model is. If more instructors leave, that gives subscribers less of a reason to stick around and pay the company money, which could lead to further consolidated subscriber churn. That's not good.

New management, debt refinancing

To add to these struggles, Peloton recently lost its CEO, Barry McCarthy. McCarthy was brought on in early 2022 to fix a business that greatly overextended itself during the pandemic and was hemorrhaging free cash flow . At one point, Peloton was burning $3 billion a year. McCarthy did a good job of stemming the bleeding ( free cash flow was negative $185 million over the past 12 months), but this business is still unprofitable. It's not a good sign that he's already leaving the role.

On a somewhat positive note, Peloton was able to refinance and extend its debt obligations. It took on a new five-year $1 billion term loan facility and $350 million in convertible notes due in 2029. With this funding, it bought back $800 million of existing convertible notes due in 2026 at a huge discount. This financial engineering move does not save its profitability problem, but it does give any new management team a longer runway to fix the company's operations.

PTON Free Cash Flow data by YCharts.

Where will Peloton be at the end of 2024?

The first order of business for Peloton is to get a new CEO in place. Right now, the company is being run by two interim CEOs from the board of directors. The board is hoping to hire another person like McCarthy who is aiming to fix the business.

But what if Peloton is not fixable? Even though McCarthy made some progress on the company's cash burn, it's still losing a ton of money, saddled with debt, and not growing. Subscribers continue to leave, and instructors are fleeing the platform.

As Warren Buffett famously said: "When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact."

This looks to be the case with Peloton. No matter what manager ends up running this connected fitness company, it's hard to envision a world where it's generating boatloads of profits a few years from now. For that reason, I think it's likely that Peloton will continue to fall throughout 2024, and it's a bad buy-the-dip candidate at the midpoint of the year.

Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Peloton Interactive. The Motley Fool has a disclosure policy .