We recently compiled a list of the 10 Best Sporting Goods Stocks To Invest In Now.In this article, we are going to take a look at where Peloton Interactive, Inc. (NASDAQ:PTON) stands against the other sporting goods stocks.
The sports industry typically generates millions of dollars through events, promotions, and endorsements. It is one of the few sectors that continued to prosper, even during the pandemic. The global sporting and athletic goods market is projected to grow significantly, driven by consumer health awareness and rising demand for fitness products. The market value reached $52.02 billion in 2023 and is expected to grow at a compound annual growth rate (CAGR) of 3.2% through 2032, due to innovation in sporting technology and materials. Sports stocks have climbed more than 10% year-to-date, pushing the sports index of the broader market to its highest level since July of last year.
The market has experienced a sudden increase in demand as it recovers from the pandemic. The pandemic initially disrupted the market with postponed events like the Olympics and supply chain challenges. However, increased consumer awareness around fitness and health post-pandemic has further fueled the global demand for sports and sporting goods.
This growth in demand has varied across regions. Western Europe and Asia Pacific have been at the forefront of the sales recovery, while Latin America has maintained its impressive growth momentum. North America also achieved steady progress, building on its previous year's performance. Looking ahead, Latin America and Southeast Asia show the greatest potential, with growth rates of 22% and 11%, respectively, in 2023. Meanwhile, although China rebounded after a challenging 2022, analysts remain cautious about future growth due to ongoing economic difficulties.
Global economic challenges, such as high inflation and uncertainty, are shaping consumer behavior. Rising prices are a top concern for consumers worldwide, affecting purchasing power and brand loyalty. Despite these challenges, sports participation is increasing in some regions, particularly in activities that are accessible, social, and less time-consuming. For instance, customer preference for pickleball and paddle tennis has increased by 159% since the pandemic. As consumer preferences evolve, companies are adapting their strategies to cater to different demographics, particularly the expanding older population.
Rising Demand for Sustainable Sporting Goods
One of the key trends in this industry is the increasing preference for sustainable sporting goods. Despite economic pressures, many consumers are willing to pay 9.7% more on average for products that have a positive environmental impact. Legislation is also playing a big role in driving sustainability. Laws like the U.S. Inflation Reduction Act and the EU Green Deal are pushing investments in green energy and sustainable solutions, including in sporting goods. The EU’s Ecodesign for Sustainable Products Regulation and Waste Framework Directive are setting stricter standards for product design, recyclability, and end-of-life management. Moreover, regulations like the EU Corporate Sustainability Reporting Directive are increasing the pressure on companies to be transparent about their environmental and social impacts.
To address these challenges and capitalize on emerging opportunities, more than 80% of sporting goods companies, both large and small, are adopting ambitious sustainability goals like CO2 reduction targets. By adopting sustainable practices, companies can not only benefit the planet but also boost brand reputation and attract eco-conscious consumers. With this context in mind, let's take a look at the best sporting goods stocks to invest in now.
Our Methodology
We analyzed multiple stock screeners and ETFs to compile a list of the best sporting goods stocks. From this list, we identified the 10 stocks most favored by elite hedge funds as of Q3 2024. The hedge fund sentiment data was obtained from Insider Monkey’s database of 900 funds. The best sporting goods stocks have been ranked in ascending order of the number of hedge funds holding a stake in them.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A group of people in a fitness class with connected fitness products in a studio or gym.
Peloton Interactive, Inc. (NASDAQ:PTON) is a leading provider of connected fitness solutions, offering a range of products. The company sells its products through various channels, including e-commerce, direct sales, retail showrooms, and third-party retailers. Founded in 2012, Peloton Interactive, Inc. (NASDAQ:PTON) is headquartered in New York.
Peloton Interactive, Inc. (NASDAQ:PTON) announced its first-quarter fiscal 2025 results, exceeding expectations for subscribers and revenue. The company is focused on improving unit economics and profitability while continuing to invest in innovation. Peloton Interactive, Inc. (NASDAQ:PTON) is on track to deliver over $200 million in annualized cost savings by the end of fiscal year 2025.
The company is also investing in content, product development, and marketing to drive long-term growth. Peloton Interactive, Inc. (NASDAQ:PTON) raised its full-year fiscal 2025 adjusted EBITDA guidance to $240 million to $290 million and its free cash flow target to at least $125 million.
To address sales growth challenges, Peloton Interactive, Inc. (NASDAQ:PTON) is expanding its retail presence through partnerships with major retailers like Costco and is seeing promising results in international markets, especially in Germany's retail channels. Moreover, Peter Stern, the newly appointed CEO, is expected to take over in January 2025. He is a seasoned leader with a strong track record of driving innovation and growth.
Peloton Interactive, Inc. (NASDAQ:PTON) strategic cost-cutting initiatives and partnerships to drive growth make the stock a compelling investment option. Here’s what Patient Capital Management said about Peloton Interactive, Inc. (NASDAQ:PTON) in its Q1 2025 investor letter:
“Peloton Interactive, Inc. (NASDAQ:PTON) declined in the first quarter, hitting its lowest per share valuation in late March since becoming a public company. The company has taken drastic action to right-size the extremely bloated cost structure, expand sales channels (Amazon, Dick’s Sporting Goods), and test other ways to reinvigorate growth. The company is hyper focused on reaching positive free cash flow generation, but the path was pushed out. We continue to believe the value of the business lives in the high-margin, sticky subscription piece of the business. We think at current valuation, the company will either successfully turn things around or be a take-out target.”
Overall PTON ranks 4th on our list of the best sporting goods stocks to invest in now. While we acknowledge the potential of PTON as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than PTON but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
