Cari Gundee rides her peloton exercise bike at her home in San Anselmo, California on April 6, 2020.
Ezra Shaw | Getty Images
Peloton stock fell Tuesday after UBS downgraded the stock from neutral to sell. An incredible spike over the past year brings greater downside risk for investors from here.
Stocks fell nearly 7% recently, after rising 370% year over year.
“Given recent market activity, we believe investors need to be cautious about the increasing trend of bull market optimism in a handful of companies that have either benefited from Covid-19 and / or entered the public markets in the past 6 years. 18 months, “said UBS analyst Eric Sheridan in a statement to clients.
The investment firm raised its price target on Peloton shares from $ 115 to $ 124 and continues to believe the company has a “long-term opportunity to disrupt traditional fitness business models.” The stock opened at $ 152.55 on Tuesday. It hit an all-time daily high of $ 171.09 on Jan. 14.
Over the weekend, the New York Times published a story about Peloton highlighting what the company’s social media account looks like “Has become a beacon of outrage over late deliveries and hours with customer service agents.”
Peloton has seen incredible growth during the Covid-19 pandemic. More and more people wanted to exercise from home and many gyms had to close. But it has been difficult to keep up with demand. The high-end manufacturer of bicycles and treadmills has problems from customers who do not receive their orders on time and are delayed for weeks, sometimes without notice.
Late last year, the company paid $ 420 million to acquire Precor, a US-based fitness manufacturer, so that its products can be manufactured faster and closer to customers’ homes. However, it will likely take some time before these efforts produce positive results. In November, Peloton announced that it would likely operate under delivery bottlenecks “for the foreseeable future”.
“The current valuation reflects a high level of investor confidence in Peloton’s ability to deliver oversized operating results (especially given logistical / operational challenges …),” said Sheridan of UBS.