Peloton Pops Post Precor

Peloton instructor Leanne Hainsby (image via Peloton).

Peloton's Annus Mirabilis 

2020 has been a miserable year for hundreds of millions suffering from social isolation and economic hardship due to COVID lockdowns, but it's been a wonderful year for Pelaton (PTON). With gyms closed, demand for Pelaton's home fitness equipment skyrocketed. The stock added to its already huge gains on Tuesday after news broke of its acquisition of Precor late Monday. Here we'll note why we're still bullish on the stock, and look at ways longs can limit their risk if we're wrong. 

The Precor Surprise

Two somewhat surprising aspects of Pelaton's Precor acquisition are that it happened and that Peloton shares jumped nearly another 12% on the news. Portfolio manager Eddy Elfenbein had a cleverly cynical spin on the company's big day:

Precor is known for its commercial gym equipment, and often, companies see their shares drop after announcing an acquisition. Bloomberg's Tara Lachappelle summarized the market appeal of the move: 

The biggest benefits of the deal would seem to be gaining Precor’s 625,000 square feet of manufacturing space in North Carolina and Washington state as well as its large roster of commercial customers, such as hotels, gyms and apartment buildings. The first helps to solve Peloton’s supply difficulties now, while the latter will give it an edge in the post-Covid economy when consumers are no longer forced to exercise at home and avoid travel.

Social Data Remains Bullish On Peloton

Our friends at LikeFolio look at social media mentions of sentiment and purchase intent regarding consumer brands. They use that to forecast sales for companies behind the brands. LikeFolio's most recent email alert on Peloton, screen captured below, predicted a strong holiday season for the company. 

We're Still Bullish On Peloton

Each day the market's open, our system analyzes past returns as well as forward-looking options market sentiment to estimate potential returns for securities (For a detailed look at our security selection process, see this article where we demonstrate it using the iShares Silver Trust (SLV) ETF as an example.). As of Tuesday's close, Peloton was one of our top ten names. 

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