Cari Gundee rides her Peloton exercise bike at her home on April 6, 2020 in San Anselmo, California.
Ezra Shaw | Getty Images
Shares of Peloton tumbled on Tuesday after UBS downgraded the stock to sell from neutral, saying an incredible run-up over the past year puts investors at risk from here.
The stock recently declined by almost 7%, up from about 370% from a year ago.
“Given recent market activity, we think investors should be wary of the rising trend of bull market optimism in a handful of businesses that have either been Covid-19 ‘beneficiaries’ or come to the public market in the last 6 months. 18 months,” UBS analyst Eric Sheridan said in a note to clients.
The investment firm raised its target price on Peloton shares from $ 115 to $ 124, adding that it still believes the company has a “long-term opportunity to disrupt traditional fitness models.” The stock opened at $ 152.55 on Tuesday. It hit an intraday high of $ 171.09 on January 14th.
This past weekend, The New York Times published a story on Peloton highlighting how the company’s social media account “became a beacon for indignation over delayed deliveries and hours spent by customer service representatives.”
Peloton experienced incredible growth during the Covid-19 pandemic, with more people wanting to exercise from home and many gyms being forced to close. But it struggled to keep up with the demand. The leading manufacturer of cycling and treadmill members has faced backlash from customers who do not receive their orders on time and experience delays for weeks on end, sometimes with little or no notice.
Late last year, the company paid $ 420 million to acquire Precor, a fitness manufacturer in the US, to make its products faster and closer to customers’ homes. But it will probably take some time before these efforts yield positive results. In November, Peloton said it was expected to work under the supply constraints “for the foreseeable future.”
“The current valuation reflects a high level of investor confidence in Peloton’s ability to deliver exceptional operating results (especially amid logistical / operational challenges …),” said UBS Sheridan.