We recently published a list of 10 Best Low Priced Growth Stocks To Invest In. In this article, we are going to take a look at where Peloton Interactive, Inc. (NASDAQ:PTON) stands against other best low priced growth stocks.
Low priced stocks usually fall under the small to mid-cap size category. This growth criteria, often proxied through high double-digit revenue growth rate, helps narrow down the stock universe to a sample of relatively cheap stocks but with explosive growth potential that tend to perform well in periods of macroeconomic stability, low interest rates, and positive economic growth. The performance of value vs. growth stocks has been studied for decades, and most studies agree that value tends to outperform growth factors over long periods of time. For instance, Vanguard Research in a 2021 publication showed that value stocks in the US have outperformed growth in almost every single year since 1936 until the early 2010s, when a major shift occurred.
Vanguard Research argued that during the 10 years preceding the publication date, US growth stocks have outperformed US value stocks by an average of 7.8% per year, which is a significantly high difference. Such findings can be attributed to several technological developments in consumer electronics, media & communications, semiconductors, and AI, which fueled unprecedented productivity improvements and growth in new markets that generally fall under the growth category. This hypothesis is confirmed by Arnott et al. (2021) study, which claims that the success of growth stocks is primarily attributed to the technology companies that benefit from platform effects and the “winner-take-all” economics. Among other factors that drove the increasing outperformance of growth stocks are low inflation and prolonged periods of low interest rates during the 2010s and early 2020s.
READ ALSO: 10 Best Low Priced Technology Stocks To Buy Now
The last 3 years presented a very mixed picture in the growth vs. value dilemma. The year 2022 brought significant outperformance of value as rising interest rates and inflation slashed the potential of growth stocks. However, 2023 and the emergence of the AI megatrend brought a new growth frontier across the semiconductor and technology sectors, which sparked an unprecedented rise in stock market concentration and the relative outperformance of growth stocks. This rally lasted for exactly 2 years and ended just recently with the inauguration of the Trump 2.0 administration and its subsequent actions that shook the global markets. The US stock market is now down 20% from its February 2025 peak, meaning that growth stocks ceded back almost half of their gains made since 2023. This has been primarily driven by Trump 2.0 actions such as tariffs and public spending cuts that could fuel inflation, keep rates high, and limit GDP growth. This is an unfavorable environment for growth stocks.
However, despite the widespread fears, we believe that the stock market is at or near its bottom, and several potential developments in the following weeks could push stock prices higher and favor the low priced growth stocks again. First, there have been widespread news that the European Union and countries like India are actively seeking the possibility of negotiating free trade agreements with the USA, which points towards the scenario that Trump’s tariffs will be cancelled at some point, at least for the major trade partners. Second, any substantial economic slowdown that could be triggered by tariffs will very likely lead to the FED cutting interest rates and the US administration playing out some of their strong cards, such as corporate tax cuts. Third, the tariff threats will lead to a (partial) move of manufacturing back into the US, which is already slowly happening, as evidenced by total manufacturing employees increasing sequentially in both February and March. This argument is further reinforced by confirmed news that large foreign semiconductor fabs are seeking to expand their presence in the US and build several fabs. All in all, the key takeaway for the reader is that once the current correction is over, the growth factor will become favored again, and the best possible move for investors under such circumstances is to seek exposure to low priced growth stocks.
A group of people in a fitness class with connected fitness products in a studio or gym.
Our Methodology
We screened the market and selected companies with a share price below $10.00 that achieved a revenue at a compound annual growth rate (CAGR) of at least 20% in the last 5 years. Then we compared the list with Insider Monkey’s proprietary database of hedge funds’ ownership and included in the article the top 10 companies with the largest number of hedge funds that own the stock as of Q4 2024.
Why are we interested in 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Peloton Interactive, Inc. (NASDAQ:PTON)
Revenue CAGR last 5 years: 36.70%
Stock price as of April 7th close: $5.15
Number of Hedge Fund Holders: 49
Peloton Interactive, Inc. (NASDAQ:PTON) is a global fitness technology company offering internet-connected exercise equipment such as bikes, treadmills, rowers, and others, which stream live and on-demand fitness classes through a subscription service. The company’s competitive advantage is based on serving a subcategory of sports lovers who are tech-savvy and prefer smart workouts at home. PTON also provides a digital app that offers paid access to various workout classes, which makes it easier to train at home without fitness coaches.
Peloton Interactive, Inc. (NASDAQ:PTON) demonstrated strong financial improvements in the latest Q2 2025, with adjusted EBITDA reaching $58 million, representing a whopping $140 million improvement YoY. The company achieved a double-digit Connected Fitness Products gross margin of 12.9% for the first time in over 3 years, driven by a favorable premium product mix and disciplined discount alignment. Consolidated free cash flow reached $106 million, marking the fourth consecutive quarter of positive FCF and showing a $143 million improvement on a YoY basis. The company also successfully reduced net debt by 30% YoY, demonstrating significant progress in deleveraging efforts and positioning itself to withstand any potential economic slowdown.
Member engagement showed strong metrics with over 2 million unique members completing Strength training, bootcamp, Pilates, or yoga workouts in Q2. Peloton Interactive, Inc. (NASDAQ:PTON) achieved meaningful improvements in member happiness with Net Promoter Scores exceeding 70 across all Bike and Tread products. Churn rates remained exceptionally low with an average net monthly Paid Connected Fitness Subscription churn of 1.4% in Q2, with churn being 60% lower for subscriptions where members engage with 2 or more disciplines per month versus just one. The company is on track to exceed $200 million of run-rate cost savings by the end of fiscal year 2025 while maintaining a focus on innovation and member experience. PTON ranks 5th on our list of best low priced stocks to buy.
Overall, PTON ranks 5th on our list of best low priced growth stocks to invest in. 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. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. 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 this cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
