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Shares in exercise equipment maker Peloton (NASDAQ: PTON), which have underperformed over the last year, have had a huge rebound this month. This time last week, Peloton’s share price was below $25. Today however, it’s at $39.

So what’s going on here? And should I buy the beaten-down growth stock now to capitalise on the upward momentum?

Why Peloton’s share price is soaring

In my view, there are a number of reasons Peloton’s share price has spiked recently. One is that there has been a change of CEO.

On 8 February, the company announced that Barry McCarthy, who has held senior leadership roles at Spotify and Netflix, has been appointed CEO and president, effective 9 February.

Peloton co-founder John Foley, who was previously the CEO, will now become executive chair. Investors were happy with the decision to replace Foley as CEO, as he has made a number of sub-optimal decisions in relation to product, pricing, demand, and capital allocation in the recent past.

Another reason Peloton’s share price has surged is that the company announced that it would be taking a series of steps to position the business for long-term growth and establish a clear path to consistent profitability.

These steps will see it cut 2,800 jobs and reduce its planned capital expenditures in 2022 by approximately $150m. It believes its actions can deliver $800m in annual run-rate cost savings.

Takeover speculation has also fueled the share price recently. In the last week, there’s been rumours that Peloton could be acquired by a larger company. Apple and Amazon are two companies that have been mentioned.

I personally don’t think Apple would be interested in Peloton. However, a deal could work for Amazon. It has the logistics network in place to deliver the exercise equipment, and could stream the content through Prime.

Finally, I believe we’ve seen a bit of a ‘short squeeze’ over the last week. Data from Nasdaq shows that in January, short interest here was above 10%. I think a bit of buying from investors has forced some of the short sellers to close their positions, which has pushed the share price higher.

Should I buy Peloton stock now?

As for whether I’d buy Peloton stock for my portfolio today, I’m not convinced the risk/reward proposition is favourable at present.

I do think there’s a market for Peloton’s premium exercise products. And I believe the company is heading in the right direction now it has replaced its CEO and announced cost-saving measures.

However, to my mind, there’s a lot of uncertainty in relation to future growth. Ultimately, it’s hard to know what kind of growth Peloton is capable of generating in a post-Covid world.

Another concern for me is competition. Not only is Peloton up against other similar work-out-from-home products, such as Lululemon’s Mirror, but it is also facing competition from gyms and exercise studios now that the world has reopened.

Given the uncertainty over future growth, I’m going to leave Peloton stock on my watchlist for now. All things considered, I think there are better stocks to buy at the moment.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Edward Sheldon owns shares in Amazon and Apple. The Motley Fool UK has recommended Amazon, Apple, Peloton Interactive, and Spotify Technology. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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The IAG (LSE: IAG) share price has had an excellent start to 2022, up 12%, as I type. I think there could be more to come.

IAG share price: ready to fly?

Let’s start with the obvious, namely the gradual removal of Covid-19-related restrictions. The move by Australia to re-open its borders to double-jabbed passengers, for example, is clearly a shot in the arm for the British Airways owner. After all, long-haul flights tend to be more lucrative. And as confidence returns, IAG’s revenue and profits should bounce back.

Another reason to like IAG is that it’s actually a collection of carriers: the aforementioned BA, Iberia, value operators Aer Lingus and Iberia Express, and low-cost LEVEL and Vueling. This diversification allows the company to cater to many/all traveller types, potentially giving it an advantage in the recovery.

A final reason relates to the FTSE 100 stock’s current valuation. Right now, the IAG share price is around 19% up on where it stood one year ago, giving the company a market-cap of £8.8bn. However, at 178p, the stock is also far below the near-500p level hit almost four years ago. From this angle, investors may consider that the company has great rebound potential.

Sure, no stock has the right to move higher and we should be wary of anchoring ourselves to a previous value. However, the recent rotation into value stocks (which IAG arguably is) may continue for a while yet, especially if interest rate rises come thick and fast.

What could possibly go wrong?

Having listed three reasons for being bullish on IAG, we might assume that I’m busy loading up on the stock? Actually, this couldn’t be further from the truth.

The fact is, the airline industry is a notoriously awful place to invest. The sheer amount of money needed to keep planes in the air means that returns on invested capital (a key quality metric) tend to be low, relative to companies in sectors such as consumer goods and software.

To paraphrase fund manager Terry Smith, companies that are able to reinvest profits at a high rate of return for many years tend to be the best stocks to own. The converse is also true.

Another issue is the level of competition any airline faces. While possessing multiple carriers might be in its favour, retaining passengers will still be a challenge for IAG, not to mention a costly exercise. This seems like a good time to mention the company’s significant debt pile.

On top of this, strikes by airline/airport staff, bad weather and terrorist activity all have the potential to impact trading. Naturally, the possibility of another Covid-19 variant lurking in the background can’t be ruled out either. This wouldn’t be such a problem for me if IAG paid a dividend but that probably won’t happen for a good while. 

Better buy

To summarise, I don’t doubt that there’s the potential to make money here. But this is most definitely not a business I’d want to own for years. For a Fool like me, that’s reason enough to avoid the stock. As an investor who adopts a ‘buy right and hold on’ mentality, IAG simply doesn’t tick enough of my boxes.

If I were to buy a travel-related recovery stock today, it would be (more of) this one. 

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

‘Metaverse stocks’ mean shares in firms that are expected to gain from the metaverse that everyone is talking about at present. Investors are scrambling to get in on the ground floor. But it’s not obvious what will and what won’t thrive in this new arena. Facebook owner Meta is a prominent metaverse stock but has already plummeted in value. That’s why I’m taking an interest in companies needed to build the metaverse’s infrastructure.

Cryptocurrency

One metaverse stock involves cryptocurrencies. I laughed at the idea when I first heard about Bitcoin in 2013, assuming it was a craze that would simply fade away. Boy was I wrong. There are still many nay-sayers. But as more and more institutional investors include cryptocurrencies in their portfolios, I can’t help but believe they’re here to stay. So, I’ve decided to add Argo Blockchain (LSE: ARB) to my portfolio.

In basic terms, ARB is a crypto-mining service provider. That means it owns and manages the computer servers required to keep track of blockchain transfers. Argo is compensated in newly created Bitcoin, the most valuable cryptocurrency in the market.

Following a 700% increase in December 2020, the company’s stock price fell in 2021. It is presently trading at 75.69p and is expected to fall further in the immediate term as Bitcoin’s value drops and cryptocurrencies possibly enter a bear market. But I’m not worried. Argo Blockchain will continue to accumulate Bitcoin until the next ‘halving event’ in 2024. The number of new Bitcoins created will be halved once this occurs. This is part of a procedure designed by Bitcoin’s developer to keep inflation under control. A bull market is usually triggered by this supply shock.

The biggest unknown is whether Argo blockchain will last until 2024. The company’s cost of revenue is uncomfortably high. It has only been profitable since 2020. It should have enough cash to withstand the next downturn market if it sells its Bitcoin now, but it’s a risk I need to keep in mind.

Metaverse computing power

Without the computer power to keep it operating, the metaverse can’t function. So, I’ll be including Nvidia (NASDAQ: NVDA) in my portfolio. From GPUs to transistors and the software that runs on them, Nvidia produces and manufactures numerous critical components that make computing possible. Nvidia stock is presently trading at $251, up 100% from this time last year and over 700% since 2017. I’m concerned that some of this is due to investor euphoria. The stock’s price-to-earnings (P/E) ratio of 77.51 is alarmingly high. I’m not usually comfortable with anything above 20, but a comment from Wells Fargo analyst Aaron Rakers has allayed some of my fears: “We estimate that the metaverse could equate to a $10bn incremental market opportunity for Nvidia over the next five years.”

Normally, I’m wary of overly optimistic projections. But there’s no way of knowing how huge the metaverse will become. It may either break apart or open up a whole new universe of possibilities. The sky’s the limit when it comes to technology.

I’d love to be a part of it if it turns out to be the latter.

The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of investment advice. Bitcoin and other cryptocurrencies are highly speculative and volatile assets, which carry several risks, including the total loss of any monies invested. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

James Reynolds has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

When Warren Buffett is looking for investments to buy for his portfolio, the master investor searches for companies that exhibit several qualities.

High-quality companies 

The most important quality he is looking for is what he has frequently referred to as an economic moat around the business.

In simple terms, this means the business must have a competitive advantage. An advantage that helps it earn and maintain higher profit margins than the competition. This means it can generate fatter returns for its shareholders and return more money to investors.

As well as these qualities, Buffett is looking for businesses that are well managed and have plenty of room for growth over the next decade.

Unfortunately, the number of companies that meet his criteria are few and far between. This is why he rarely trades in and out of positions and sticks with stock holdings for decades. 

The billionaire investor also rarely invests outside his home market. With the largest equity market in the world, Buffett does not really need to invest outside the US, although he has been expanding his international footprint in recent years. 

Still, even though he rarely invests outside of the US, that does not mean we cannot replicate his strategy in the UK. As such, here are three UK shares with Buffett-like qualities I would buy for my portfolio today. 

Top UK shares

Focusrite is a global music and audio products group that develops and markets proprietary hardware and software products. These products are incredibly specialist because artists rely on their hardware and software to produce good content. This gives the company a competitive advantage.

Artists are not likely to choose a cheaper product as it may impact quality, which could affect the listener experience. That is why I believe this is the sort of outfit Buffett would like to own. What’s more, as the music industry expands, it has tremendous potential.

All of these types of companies exhibit Buffett qualities, but I think it would be a mistake to say that their growth can be taken for granted. Each one faces a unique set of challenges. Rising prices and competitive forces are just two factors. Even though they exhibit attractive qualities, they need to keep investing in growth to stay ahead of the competition.

Renishaw also appears to exhibit the sort of qualities Buffett would like to see in a corporation. The business helps manufacture precision instruments for the engineering and health care sectors. These instruments are highly accurate, and customers will not skimp on the cost.

As one of the largest manufacturers in Europe producing these kinds of components, the company has a substantial competitive advantage and, like Focusrite, it seems unlikely customers will move elsewhere. 

Warren Buffett stock

Finally, I think A.G. Barr exhibits the sort of qualities the billionaire is looking for in an investment. The owner of the Irn-Bru brand has similar attributes to Buffett’s most famous investment, Coca-Cola, although its international footprint is significantly smaller. 

Despite this drawback, I believe this is one of the best UK shares to buy with Buffett-like qualities today. I think it would make a perfect addition to my portfolio, alongside the businesses above. 

Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has recommended AG Barr, Focusrite, and Renishaw. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Key points

• The company’s fundamentals are going in the right direction
• The ITM share price could benefit as more industries seek greener alternatives
• Management is looking for long-term growth

The ITM Power (LSE: ITM) share price has endured a torrid time of late. Over the past five years, this stock has tumbled 61.65%. This is a company that pursues greener, hydrogen-based energy. It specialises in energy storage systems and renewable hydrogen. With many investors now seeking green energy exposure, I want to know if the ITM share price could soar. Let’s take a closer look.

The fundamentals

In almost all of the business fundamentals, ITM looks to be improving. In the half-year report for the six months to 31 October 2021, revenue had increased massively to £4.2m from £200,000 in the same period in 2020.

Furthermore, gross losses narrowed from £2.8m to £2.6m. In a similar vein, the company’s cash burn was down 15.7%. For me, this is a good indication that this company is starting to get its finances under control, especially as it aggressively pursues growth in the hydrogen energy field.

However, adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) were actually losses and widened to £12.9m from £10.4m. In spite of this, Citigroup stated that it views “the risk/reward trade-off as attractive”.

Revenue over the years 2017 to 2021, grew from £2.42m to £4.28m. This means that revenue has grown at an annual compound rate of 12%. This is both solid and consistent and shows the company is working hard to monetise its hydrogen technology.

That said, its revenue is still relatively small compared to the firm’s market capitalisation of £1.5bn. In spite of this, liquidity does not appear to be an issue, with ITM easily raising £250m in October 2021.

Long-term vision

Just last month, the company secured funding of €1.95m from the German Government. This means the company will play a large role in developing hydrogen energy throughout Germany as part of the country’s National Hydrogen Strategy.

This contract runs until March 2025 and is an encouraging sign of ITM’s long-term potential. I believe this could have a positive impact on the share price in the near future.

Furthermore, the business sold a 24-megawatt electrolyser, which uses green hydrogen to produce ammonia, to Linde Engineering based near Oslo, Norway. This will be shipped in the fourth quarter of fiscal year 2022, with revenue commencing the next year.

This is further evidence the long-term potential, something I like to see in any stock in which I invest. I believe, therefore, that the ITM share price could benefit as more countries and companies move to greener solutions.   

This company is still expanding and many of the fundamentals are heading in the right direction. As more and more industries switch to greener energy sources, demand for ITM products could increase. This demand could indeed translate into a soaring ITM share price. I will be buying shares now to benefit from long-term growth.

Andrew Woods has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The best dividend stocks are generally those that can provide consistent dividends and long-term capital gains. While dividends on their own are great, the combination of dividends and capital gains is far more powerful when it comes to building long-term wealth.

Here, I’m going to highlight two FTSE 100 dividend stocks that have considerable share price upside right now, according to City analysts. I own both of these stocks and I’d be happy to buy more shares at current prices.

Analysts see this FTSE 100 dividend stock going higher

Let’s start with financial services giant Legal & General (LSE: LGEN), which currently has a share price of 288p. Here, analysts at Barclays have a 12-month price target of 406p — 41% higher than the current price. If LGEN can achieve that price target, investors are looking at some big total returns, as the yield on the stock is nearly 7%, at present.

While there’s no guarantee Legal & General will hit 406p any time soon, I do think this dividend stock has the potential to climb higher. LGEN is a well-run business that has a good track record in terms of growth and dividends over the last decade. Looking ahead, it also has multiple growth drivers due to its diversified business model (insurance, investment management and retirement solutions).

Yet, at present, the FTSE 100 stock trades on a forward-looking price-to-earnings (P/E) ratio of just 8.8. That seems far too low, to my mind. By contrast, the median P/E ratio across the FTSE 100 is about 15.4 right now.

Of course, there are risks to consider. One is the fact that the stock can be quite volatile at times. This is illustrated by its ‘beta’ (a measure of volatility compared to the market) of 1.6, which indicates it’s about 60% more volatile than the broader market.

I see the overall risk/reward proposition as very attractive however. I think this stock has the potential to provide healthy total returns in the years ahead.

46% share price upside

A second Footsie dividend stock that has considerable share price upside, according to analysts, is investment firm Hargreaves Lansdown (LSE: HL). Its shares are currently changing hands for around 1,355p. However, analysts at Barclays have a 1,980p price target on the stock. That represents an upside of 46%.

This fellow FTSE 100 stock has been out of favour for a while. However, there’s now a catalyst that could push the share price higher in the near term. That’s rising interest rates. You see, Hargreaves Lansdown generates significant income from its clients’ cash deposits. So if UK interest rates rise, its income is likely to get a big boost. This could propel the share price higher.

One risk to consider here is that competition in the retail investment space is rising. In recent years, platforms such as Freetrade and Trading 212 have become quite popular with UK investors. This could impact Hargreaves’ growth rate going forward.

All things considered however, I see a lot of investment appeal here. The yield is almost 3% and the stock doesn’t look that expensive on a forward-looking P/E ratio of 22.

Edward Sheldon owns Hargreaves Lansdown and Legal & General Group. The Motley Fool UK has recommended Barclays and Hargreaves Lansdown. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.