We have been recommending that investors short Peloton since October 2020. Even after falling 76% in 2021 and continuing to drop this month, Peloton’s valuation remains disconnected from the reality of the firm’s fundamentals and could fall much further.
We believe the stock will likely drop below $15 before it bottoms.
Peloton
PTON,
was at $37 a share when we wrote this report earlier this month. Our thesis remains unchanged. We saw the decline in shares coming for reasons long before the recent weakness.
Peloton’s challenges
The biggest challenge to any Peloton bull case is the rising competition from incumbents and startups across the home exercise equipment industry, along with Peloton’s continued lack of profitability.
For instance, Apple
AAPL,
has expanded its fitness subscription service, which already integrates with its existing suite of products. Amazon
AMZN,
recently announced Halo Fitness, a service for home video workouts which integrates with Amazon’s Halo fitness trackers.
Tonal, which counts Amazon as an early investor, offers a wall-mounted strength training device, and Lululemon
LULU,
offers the Mirror. Brands such as ProForm and NordicTrack have offered bikes, treadmills and more for years and are ramping up their efforts in subscription workout class offerings.
In response, Peloton announced its latest product, “Guide”, a camera that connects to a TV while tracking user movements to assist in strength training. Truist analyst Youssef Squali called the offering “underwhelming” compared to the competition.
Peloton’s struggles also come as traditional gym competitors are seeing renewed demand.
Furthermore, of its publicly traded peers, which include Apple, Nautilus
NLS,
,
Lululemon, Amazon, and Planet Fitness
PLNT,
(PLNT), Peloton is the only one with negative net operating profit after-tax (NOPAT) margins. The firm’s invested capital turns are higher than most of its competitors but are not enough to drive a positive return on invested capital (ROIC). With an ROIC of -21% over the trailing 12 months, Peloton is also the only company listed above to generate a negative ROIC.
Peloton’s profitability vs. competition: TTM
|
Company
|
Ticker
|
NOPAT margin
|
Invested capital turns
|
ROIC
|
|
Apple
|
AAPL
|
26%
|
8.9
|
227%
|
|
Nautilus
|
NLS
|
14%
|
2.5
|
35%
|
|
Lululemon Athletica
|
LULU
|
16%
|
2.1
|
34%
|
|
Amazon.com
|
AMZN
|
6%
|
2.6
|
17%
|
|
Planet Fitness
… |
Read More: Opinion: Peloton’s stock price is disconnected from reality, and it
Opinion: Peloton’s stock price is disconnected from reality, and it
We have been recommending that investors short Peloton since October 2020. Even after falling 76% in 2021 and continuing to drop this month, Peloton’s valuation remains disconnected from the reality of the firm’s fundamentals and could fall much further.
We believe the stock will likely drop below $15 before it bottoms.
Peloton
PTON,
was at $37 a share when we wrote this report earlier this month. Our thesis remains unchanged. We saw the decline in shares coming for reasons long before the recent weakness.
Peloton’s challenges
The biggest challenge to any Peloton bull case is the rising competition from incumbents and startups across the home exercise equipment industry, along with Peloton’s continued lack of profitability.
For instance, Apple
AAPL,
has expanded its fitness subscription service, which already integrates with its existing suite of products. Amazon
AMZN,
recently announced Halo Fitness, a service for home video workouts which integrates with Amazon’s Halo fitness trackers.
Tonal, which counts Amazon as an early investor, offers a wall-mounted strength training device, and Lululemon
LULU,
offers the Mirror. Brands such as ProForm and NordicTrack have offered bikes, treadmills and more for years and are ramping up their efforts in subscription workout class offerings.
In response, Peloton announced its latest product, “Guide”, a camera that connects to a TV while tracking user movements to assist in strength training. Truist analyst Youssef Squali called the offering “underwhelming” compared to the competition.
Peloton’s struggles also come as traditional gym competitors are seeing renewed demand.
Furthermore, of its publicly traded peers, which include Apple, Nautilus
NLS,
,
Lululemon, Amazon, and Planet Fitness
PLNT,
(PLNT), Peloton is the only one with negative net operating profit after-tax (NOPAT) margins. The firm’s invested capital turns are higher than most of its competitors but are not enough to drive a positive return on invested capital (ROIC). With an ROIC of -21% over the trailing 12 months, Peloton is also the only company listed above to generate a negative ROIC.
Peloton’s profitability vs. competition: TTM
…
Read More: Opinion: Peloton’s stock price is disconnected from reality, and it