Cari Gundee leaves with the Peloton exercise bike at home on April 6, 2020 in San Anselmo, California.
Ezra Shaw | Getty Images
Peloton shares collapsed on Tuesday after UBS downgraded the shares to sell from neutral, saying that an incredible increase in the last year leaves more risk of disadvantage for investors here.
Shares have recently fallen by almost 7%, after gathering by about 370% from a year ago.
“Given recent market activity, we believe that investors need to pay attention to the growing trend of bull market optimism in a handful of companies that have been ‘beneficiaries’ of Covid-19 and / or have come to public markets in recent years. 6-18 months, “UBS analyst Eric Sheridan said in a note to clients.
The investment firm raised its price target for Peloton shares from $ 115 to $ 124, adding that it still believes the company has a “long-term opportunity to disrupt traditional fitness business models.” The stock opened at $ 152.55 on Tuesday. On January 14, it reached an intraday high of $ 171.09.
Over the weekend, The New York Times published a story on Peloton that highlighted how the company’s social account “has become a beacon for outrage about late deliveries and hours spent with customer service representatives.”
Peloton experienced incredible growth during the Covid-19 pandemic, with more people looking to work from home and many gyms forced to close. But he struggled to keep up with demand. The state-of-the-art bicycle and treadmill manufacturer has faced side effects from customers who do not receive orders on time and face delays for weeks on end, sometimes with too little or no notice.
Late last year, the company paid $ 420 million to buy Precor, a US-based fitness manufacturer, to enable it to make its products faster and closer to customers’ homes. But it will probably take some time for these efforts to yield positive results. In November, Peloton said it expects to operate under supply constraints “for the foreseeable future.”
“The current assessment reflects a high level of investor confidence in Peloton’s ability to deliver oversized operational results (especially amid logistical / operational challenges …),” said UBS’s Sheridan.