Carl Gundee rides his Peloton exercise bike at his home on April 6, 2020 in San Anselmo, California.
Ezra Shaw | Getty Images
Peloton’s shares plummeted on Tuesday after UBS downgraded its shares to sell neutral, saying that an incredible increase last year leaves investors more likely to fall.
The shares recently fell by almost 7%, having risen by about 370% a year ago.
“Given the recent market activity, we believe that investors need to be cautious about the growing trend of bullish market optimism in a handful of companies that have been ‘beneficiaries’ of Covid-19 and / or have come to public markets in the past 6 18 months, “UBS analyst Eric Sheridan said in a note to customers.
The investment company raised its target price 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 shares opened at $ 152.55 on Tuesday. It reached an all-time intraday high of $ 171.09 on January 14.
Over the weekend, the New York Times also published an article in Peloton that highlighted how the company’s social media account “became a beacon for outrage over delivery delays and hours spent with customer service representatives.”
Peloton had incredible growth during the Covid-19 pandemic, with more people looking to work outside the home, and many gyms were forcibly closed. But it has been striving to meet demand. The high-tech treadmill and bicycle manufacturer has faced a backlash from customers who aren’t getting their orders on time and are experiencing delays for weeks on end, sometimes with little or no warning.
At the end of last year, the company paid $ 420 million to acquire Precor, a US-based fitness equipment manufacturer, to allow it to make its products faster and closer to customers’ homes. But it will probably take some time for these efforts to produce positive results. In November, Peloton said it expected to operate with supply restrictions “in the foreseeable future”.
“The current assessment reflects a high level of investor confidence in Peloton’s ability to deliver extraordinary operating results (especially in the midst of logistical / operational challenges …),” said Sheridan of UBS.