Is Peloton stock a buy as it formed a bullish divergence pattern?

The Peloton (NASDAQ: PTON) stock price crashed by about 80% in 2021 as the rotation from lockdown stocks to reopening stocks continued. The sell-off continued on the final day of the year after the company received a downgrade from analysts at JMP Securities. It is trading at $35.75, which was the lowest it has been since May 2020.

Why did Peloton crash?

Peloton is a company that disrupted the home fitness market. The firm sells several products, including its bikes, treadmills, apparel, and accessories. In addition, the firm sells a subscription package that gives users access to customized fitness content.

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As such, the company did well in 2020 as the US economy went into a lockdown and many governments considered gyms as being non-essential services. Consequently, the Peloton stock price surged to an all-time high of $170 in 2020.

2021 was a different year for the company. While demand for its products remained high, the company faced the challenge of supply chain disruptions. At the same time, investors abandoned stocks that did well during the pandemic like Teladoc and Zoom Technologies.

The most recent earnings did not help the company. It announced that its revenue was slowing down and warned that the situation could get worse. Consequently, the firm announced that it will freeze all hiring even as it invested in a new American plant. 

The Peloton stock price crashed on Friday after an analyst at JMP Securities lowered his outlook from Market Perform from Market Outperform. He said:

“With COVID-19 having pulled forward demand, we believe Peloton is now having to sell into people who are less emphatic about fitness and are likely harder to convert, leading to less-efficient marketing spend.”

According to Webull, the average analysts estimates on the Peloton stock price is at $75, which is about 50% above where it ended the year. The stock could rebound in 2021 as investors rush to buy the dip.

Peloton stock price forecast

The daily chart shows that the PTON stock price has been in a major bearish trend in the past few months. As a result, the stock has moved below all moving averages, which is a bearish signal. However, a closer look at the Relative Strength Index (RSI) and MACD shows that the stock is forming a bullish divergence pattern. Therefore, this pattern signals that there is a possibility that the stock will rebound in 2022.

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