An article on barrons.com had the headline “Peloton Stock Sank Again. That Doesn’t Make It Cheap.” In December 2020, Peloton’s stock had a price of more than \($160\) per share. When the barrons.com article was written in August 2022, the price had fallen to \($11\) per share. The article quoted an investment analyst as observing: “For a company with no profits and declining revenues, it seems hard to call that ‘cheap’ unless you see a material inflection in future subscribers.”

a. What makes a stock “cheap”? What makes a stock “expensive?” Is it all just a matter of the stock’s price? If so, why did the investor analyst argue that Peloton’s stock wasn’t cheap at a price that was more than 90 percent below the stock’s highest price?

b. Would every investor be likely to agree with the analyst’s opinion that Peloton’s stock was still expensive at \($11\) per share? If so, why were any investors buying the stock at that price?