Why Shares Of Peloton Are Up By 5% Today?The stock made an attempt to settle above the $90 level.
Peloton Video 07.05.21.
Peloton Stock Rebounds After Sell-Off
Shares of Peloton gained upside momentum as traders rushed to buy the stock after the recent sell-off.
Trading Derivatives carries a high level of risk to your capital and you should only trade with money you can afford to lose. Trading Derivatives may not be suitable for all investors, so please ensure that you fully understand the risks involved, and seek independent advice if necessary. A Product Disclosure Statement (PDS) can be obtained either from this website or on request from our offices and should be considered before entering into a transaction with us. Raw Spread accounts offer spreads from 0.0 pips with a commission charge of USD $3.50 per 100k traded. Standard account offer spreads from 1 pips with no additional commission charges. Spreads on CFD indices start at 0.4 points. The information on this site is not directed at residents in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
Peloton has recently provided its quarterly report, beating analyst estimates on both earnings and revenue. However, the market focused on the recall of Peloton’s treadmills, which is projected to cost $165 million.
Previously, the company insisted that its treadmills were safe if used properly, but it has succumbed to regulatory pressure and stated that its initial response to Consumer Product Safety Commission was a mistake. Peloton stopped the sales of treadmills and promised to introduce more safety measures.
What’s Next For Peloton?
Peloton shares tested highs at $171 at the beginning of this year, but company’s internal problems and valuation concerns pushed the shares towards recent lows at $80.48. This is a significant pullback that has clearly attracted speculative buyers who are willing to bet that the company will manage to successfully navigate the treadmill crisis and continue to grow.
The direct financial impact of the current crisis is not huge since the majority of company’s revenue comes from its popular bikes. The main question is whether Peloton will be able to quickly solve its problems with regulators and come up with a safer treadmill.
While Peloton shares have lost a lot of ground since the beginning of this year, the stock is valued at about 125 forward P/E for 2022 which is a very rich valuation even for the current market environment.
To justify this valuation, Peloton must grow at a fast pace, and it needs the treadmills to boost its revenue and expand its customer base. In this light, I’d expect that the market will focus mostly on the treadmill story rather than on the company’s financials in the next few months. If Peloton manages to solve the problem quickly, the stock will have a good chance to gain solid upside momentum.
For a look at all of today’s economic events, check out our economic calendar.