Peloton Could Hit The Skids

Peloton Could Hit The Skids

about 4 years ago2 mins

Mentioned in story

Short-selling specialist investor Citron Research has a reputation for being acerbic – but a research note out Tuesday predicting shares of exercise bike guru Peloton will fall to $5 in 2020 may leave a bitter taste in the mouth… 😖

What does this mean?

Peloton peddles luxury (expensive) home workout equipment as well as standalone subscriptions video-linking fitness nuts to instructors. In its last financial year the company doubled revenue and subscribers – but high marketing costs and accounting problems helped it to a $200 million loss four times bigger than a year before.

In September Peloton nevertheless joined the host of companies selling shares this year in an initial public offering (IPO). It didn’t work out brilliantly: despite raising $1.2 billion, the company's stock unconventionally fell on its first day of trading. And while it's risen since, a widely derided advertisement combined with Citron’s pessimistic price tag has given Peloton a week to forget.

Most IPOs rise on their first day of trading
Most IPOs rise on their first day of trading

Tuesday’s research note transcends accusations of faddishness and dwindling reach to detail flaws in Peloton’s business model. As well as competitors creating more innovative, diverse, and affordable products, the company's contending with legal issues over its formerly unique leaderboard tech and workout soundtracks – not to mention leadership criticisms 👎

Why should I care?

Citron thinks – especially post-WeWork – that Peloton’s current stock market valuation looks unrealistic. Rather than being valued as a tech company, it should instead be viewed as an exercise equipment maker; and even when compared to other subscriber-based businesses, Citron believes Peloton is overpriced.

Source: Citron Research
Source: Citron Research

The company’s share price duly fell 7% on Tuesday to $32. And while a recent subscription price cut and the launch of new Amazon Fire and Apple Watch apps could yet bring in more cash – with some analysts predicting Peloton’s stock will hit $50 next year – Citron is warning investors that much of the exercise bike company hype is mere spin.

Enjoyed this subscriber-exclusive story? Pick a reaction to let us know… 😉

Finimize

BECOME A SMARTER INVESTOR

All the daily investing news and insights you need in one subscription.

Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

/3 Your free quarterly content is about to expire. Uncover the biggest trends and opportunities. Subscribe now for 50%. Cancel anytime.

Finimize
© Finimize Ltd. 2023. 10328011. 280 Bishopsgate, London, EC2M 4AG