Cari Gundee rides her Peloton stationary bike at her home April 6, 2020 in San Anselmo, California.
Ezra Shaw | Getty Images
Platoon shares plummeted Tuesday after UBS downgraded the stock to sell from neutral, saying an incredible rise over the past year from here poses more downside risk to investors.
Shares recently fell nearly 7%, up about 370% from a year ago.
“Given recent market activity, we think investors should be wary of the bull market bullish bull market trend in a handful of companies that were either Covid-19 ‘beneficiaries’ and / or moved to public markets in the past 6 years 18 months, ”said UBS analyst Eric Sheridan in a note to customers.
The investment firm raised its target price for Peloton stock from $ 115 to $ 124, adding that it still believes the company has a “long-term opportunity to disrupt traditional fitness business models.” Shares opened on Tuesday at $ 152.55. It hit an all-time intraday high of $ 171.09 on January 14.
Over the weekend, The New York Times released a story on Peloton highlighting how the company’s social media account “has become a beacon for outrage over delayed deliveries and hours spent with customer service representatives.”
Peloton experienced incredible growth during the Covid-19 pandemic, with more people looking to exercise from home and closing many gyms. But it struggles to keep up with demand. The high-end bike and treadmill manufacturer has faced backlash from customers who don’t receive their orders on time and suffer weeks of delays, sometimes with little to no notice.
Late last year, the company paid $ 420 million to acquire Precor, a US-based fitness manufacturer, so it can make its products faster and closer to customers. But it will likely take time for these efforts to yield positive results. In November, Peloton said it expected to operate under supply constraints “in the near future.”
“The current valuation reflects great investor confidence in Peloton’s ability to deliver extraordinary business results (especially amid logistical / operational challenges …),” said Sheridan of UBS.