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Why Peloton stock has plunged 25% in one month

Brian Sozzi
·Editor-at-Large
·3 min read
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Peloton's stock (PTON) is looking a little less fit as investors dump 2020's hot stay-at-home trades in favor of reopening trades such as airlines hotels with COVID-19 infections and deaths slowing down.

Shares of the at-home fitness equipment maker are down about 26% over the past month, according to Yahoo Finance Premium data. The S&P 500 is up slightly during that span, while the Nasdaq Composite is down 4.5%.

"The recent share price action could be seen as the broader market moving away from reopening trades," BMO Capital Markets analyst Simeon Siegel told Yahoo Finance. Siegel rates Peloton shares at an Underperform. "The question here is whether there has been too much demand for Peloton's stock seeing as we may have moved past the worst of the pandemic."

Siegel adds the stock price action may be starting to reflect a slowing in growth rates for Peloton this year as people get vaccinated and venture back to gyms or workout outside in the spring/summer weather.

For its part, Peloton did what it needed to do on its earnings day several weeks ago to temper concerns about the pace of demand. Even considering the company's ongoing production delays, Peloton's latest quarter was impressive.

Photo by: STRF/STAR MAX/IPx 2020 9/22/20 Big Business in New York Ctiy.
Photo by: STRF/STAR MAX/IPx 2020 9/22/20 Big Business in New York Ctiy.

Peloton’s fiscal second quarter saw total subscribers clock in at 4.4 million, up sharply from 2 million in the year ago period. Total revenue surged 128% year-over-year to $1.1 billion. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) rose to $116.9 million from a loss of $28.4 million a year earlier.

For its current fiscal year, Peloton sees total revenue at $4.1 billion “or more” and adjusted EBITDA of $300 million. In its prior fiscal year, Peloton delivered revenue of $1.83 billion and adjusted EBITDA of $117.7 million.

Impressive growth rates by any stretch of the imagination.

"We have said we believe our order-to-delivery is going to come down. This investment certainly will help. We see light at the end of the tunnel for sure, with these manufacturing ramps. We've added two new factories in Taiwan over the last four months alone. And so we feel like we're in a good place with manufacturing and sourcing,” Peloton president William Lynch told Yahoo Finance Live following the company's latest earnings.

But the valuation on Peloton likely remains tough on one’s analytical eyes even with those recent growth rates, projections for the next 12 to 24 months and the recent sell-off.

"Peloton has a great product and is a great company, but there are other options out there," said Siegel,

And right now, those options appear to be reopening trades.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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