Peloton (PTON) shares tumble after UBS hits cyclemaker with downgrade

Peloton shares fell on Tuesday after UBS downgraded the rating to sell it from neutral, saying an incredible surge over the past year left more downside risk for investors in the past. ‘here.

Shares were recently down nearly 7%, after rising around 370% from a year ago.

“Given recent market activity, we believe investors should be wary of the growing trend of bullish market optimism in a handful of companies that have either been the ‘beneficiaries’ of Covid-19 and / or have been on the public market within the past 6 years. 18 months, “UBS analyst Eric Sheridan said in a note to clients.

The investment firm raised its price target on Peloton shares to $ 124 from $ 115, adding that it still believes the company has a “long-term opportunity to disrupt traditional fitness business models.” The stock opened Tuesday at $ 152.55. It hit an intraday high of $ 171.09 on January 14.

Over the weekend, the New York Times ran an article on Peloton that highlighted how the company’s social media account “has become a beacon of outrage over delayed deliveries and hours spent with representatives of the customer service”.

Peloton has seen incredible growth during the Covid-19 pandemic, with more people seeking home training and many gyms forced to close. But he struggled to keep up with demand. The manufacturer of premium bikes and treadmills has faced backlash from customers who don’t get their orders on time and experience delays for weeks, sometimes with little to no notice.

At the end of last year, the company paid $ 420 million to acquire Precor, a U.S.-based fitness maker, to enable it to make its products faster and closer to customers’ homes. But it will likely take some time for these efforts to yield positive results. In November, Peloton said it expected to operate under supply constraints “for the foreseeable future.”

“The current valuation reflects a high level of investor confidence in Peloton’s ability to deliver exceptional operating results (especially amid logistical / operational challenges …),” said Sheridan of UBS.