Peloton Interactive (PTON 6.37%) just did something it’s never done before. Shares of the connected fitness specialist surged 35% on Thursday, marking the biggest one-day gain since its IPO in 2019.

The earnings come as investors desperately await signs of recovery from the battered pandemic winner. Did investors get what they were looking for? Is it finally time to buy Peloton stock? Let’s take a closer look at the latest results.

Image source: Peloton.

Is Peloton back?

Peloton’s fourth-quarter fiscal 2024 report and forecasts show that the company still faces numerous challenges, even though investors appear to believe the stock is now moving in the right direction.

Revenue for the quarter rose 0.2% year over year to $643.6 million, beating estimates of $630.5 million and halting a long sales decline.

The subscription business continued to grow, with revenue increasing 2.3% year-over-year to $431 million, albeit due to price increases. Both the number of paid Connected Fitness subscriptions and paid app subscriptions declined, resulting in a decline in membership from 6.5 million to 6.4 million.

Sales of bikes, treadmills and other equipment continued to decline, falling 4% to $212.1 million. However, the biggest improvement in the numbers came from the company’s decision to close its Precor plant in March. This helped increase overall gross margin by more than 17 percentage points, and Precor also achieved over 20% year-over-year revenue growth in the quarter.

This helped the company take a big step towards profitability as it was able to reduce its net loss under generally accepted accounting principles (GAAP) from $241.8 million to $30.5 million. On an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) basis, it turned a loss of $34.7 million in the fourth quarter of 2023 into a profit of $70.3 million in the fourth quarter of 2024.

What’s next for Peloton?

Peloton’s 2025 forecast also suggests that investors will need to be patient during the recovery.

For fiscal 2025, management expects a decline in hardware sales and a slight increase in attrition. It forecasts a 9% decline in paid connected fitness subscriptions to 2.68 million to 2.75 million and a similar 9% decline in revenue to $2.4 billion to $2.5 billion.

There was one bright spot in the forecast. The company expects adjusted EBITDA of $200 million to $250 million, up from just $3.5 million last year. This will benefit from the closure of the manufacturing facility as well as a restructuring plan that includes layoffs and a target of $200 million in ongoing cost savings. In addition, Peloton is introducing a new $95 activation fee for used equipment, which should help boost margins and the bottom line.

Peloton is also still in the process of finding a full-time CEO, and a comprehensive plan will likely not be implemented until the company finds a permanent CEO.

Is Peloton stock a buy?

Such a price increase is certainly encouraging for long-term investors, but given that revenue and subscriptions are expected to continue to decline significantly this year, it is difficult to participate in Peloton’s recovery.

Cutting costs is a smart move, but cost cutting alone will not restore the company’s success or brand relevance.

Peloton doesn’t need to revive pandemic-era hype for the stock to be a winner, but revenue growth appears to be a prerequisite for longer-term success.

A new CEO could breathe new life into the company, but outgoing CEO Barry McCarthy was supposed to be that leader and has failed in his mission. Getting Peloton back on track will be a difficult task for even the most experienced turnaround specialist, as the pool of potential customers who didn’t already consider trying the product during the height of the pandemic is likely small.

Still, Thursday’s increase shows that it won’t take much for the stock to keep rising. If the company can beat its 2025 guidance while showing signs of improvement, the stock should continue to rise from here. However, I wouldn’t call the stock a buy until the company figures out how to grow sales again.