Peloton Is Down By 10%, Here Is Why

Key Insights

• Peloton is reportedly searching for an investor that could buy a minority stake in the company. 
• If confirmed, the report signals that the company is facing material problems. 
• The current market environment is bearish for Peloton as investors rush out of unprofitable companies. 

Peloton Stock Declines After Report Indicates That It Is Searching For A Minority Investment

Shares of Peloton found themselves under pressure after a Wall Street Journal report indicated that the company was searching for investors who were willing to pay for 15% – 20% stake in the business.

Back in February, traders speculated that Amazon, Nike or Apple could buy the company. However, the potential deal never materialized, and Peloton stock has moved to yearly lows.

The WSJ report served as a negative catalyst for Peloton stock as it indicated that the company failed to sell itself and was trying to raise more cash to support the turnaround of its business. The company’s desire to sell a stake is certainly viewed as a sign of financial weakness.

What’s Next For Peloton Stock?

Currently, analysts expect that Peloton will report a loss of $3.92 per share in the current year and a loss of $1.1 per share in the next year, so the company is not expected to be profitable in the near term.

The market is worried that Peloton has already seen peak demand for its products, and that consumers’ preferences have already shifted after the end of the acute phase of the pandemic.

In additon, inflation and supply chain problems may put more pressure on the company’s bottom line. More, the rising interest rate environment is bearish for unprofitable companies like Peloton. In this light, it remains to be seen whether speculative traders will be ready to buy the stock after the current pullback.

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