Peloton Interactive share price continues to trade near lows

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Peloton’s share price hovers near lows as demand for its products wane and impairments delay SEC filing

Source: Bloomberg

 

Indices Shares Peloton Interactive Price U.S. Securities and Exchange Commission Nasdaq

 Shaun Murison | Senior Market Analyst, Johannesburg | Publication date: Thursday 01 September 2022 

What does Peloton Interactive Inc. do?

Peloton Interactive Inc, is a US based exercise and media company listed on the Nasdaq Stock Exchange. The company specializes in exercise equipment coupled with internet capabilities which allow users to stream interactive workout routines through subscription agreements.

Why did the Peloton share price rally so much into 2021?

Demand for the company’s products surged in the heart of the Covid pandemic. The stay-at-home environment through hard lockdowns, saw increased appetite for fitness products, for which Peloton provides in a unique way. This fueled significant speculative investment in the company, driving the share price to the highs of January 2021. The rally that ensued through the pandemic saw the share price gaining more than 700%

Why is the Peloton share price down so much now?

Since the heart of the pandemic, demand for Peloton’s product and services have subsided and the share price has fallen more than 90% to date. The ‘post’ covid reopening of the US economy has seen a return to conventional gym memberships and softened demand for the group’s offerings. In turn the company has seen revenue under pressure and earnings are in negative territory. The group also has negative cash flow from its operations and has been looking to downsize its staff contingent in lieu of looking for cost efficiencies. Peloton’s capital structure needs a rework, and the company is seeking outside investment to help stabilize its balance sheet as well as work on a turnaround strategy within the renewed market environment in which it operates.

Peloton to miss SEC filing date

Adding to company woes was the short form announcement that Peloton will not be able to file its annual report form in accordance with the requirements of the Securities and Exchanges Commission (SEC).

Why is the Peloton filing delayed?

The delay in SEC filing is due to the company requiring more time to assess impairment charges. These charges pertain to the group restructuring and decision to exit its final-mile operations in preference of outsourcing the warehouse and delivery functions of the business.

Investigation into false or misleading statements from Peloton

In lieu of the delayed SEC filing, the share price of Peloton continued to fall substantially (more than 8% on open). This has prompted the Schall Law Firm, a national shareholder rights litigation specialist, to investigate the matter, calling on Peloton investors who think they have been prejudiced by the action to come forward.

Is the Peloton share price a buy at current levels?

 

Source: Refinitiv

A consensus of analyst estimates, sourced from Refinitiv data suggests a long term ‘buy’ rating for Peloton Interactive.

This seems a rather optimistic view. In the current market environment high yielding stocks are finding preference over stocks primed for growth. Peloton, still trading in loss making territory has yet to prove itself to be either. For a more favourable outlook for the company, we would prefer to see some stability returning to the balance sheet, with cash flow and earnings starting to improve and move back towards positive territory.

Peloton – Technical Analysis

Source: IG Charts

The share price of Peloton remains in a long-term downtrend as evidenced by the price trading firmly below the 200-day simple moving average (blue line). Over the short to medium term, we see a broad consolidation between levels 7.50 and 14.70.

Traders might prefer to keep a short bias to trades on the company, looking for either a bearish reversal closer towards range resistance or a downside break of support (confirmed with a close) for entry.

Traders looking for long entry might prefer to wait for some signs that the longer-term downtrend is reversing. For this we would want to see the price breaking above range resistance and testing the 200-day simple moving average (blue line).