Peloton Slides As IPO Lock-Up Set To Expire On Monday

Shares of Peloton (PTON) are trading lower in Friday afternoon trading ahead of the expiration of its post-IPO lock-up period, which is set to end after February 23. Several analysts maintained their current ratings on the stock ahead of the expiration, with two reaffirming bullish stances.

MKM PARTNERS: Ahead of the lock-up expiration, MKM Partners analyst Rohit Kulkarni reiterated a Neutral rating and $28 price target on Peloton, saying that he thinks almost all locked-up Peloton shares have "significant" positive returns. Kulkarni added that he thinks this might lead to incremental downside pressure on Peloton shares over the near-term, pointing to underperformance by Lyft (LYFT) and Uber (UBER) recently around the times of their respective IPO lock-up expirations.

JPMORGAN: Meanwhile, JPMorgan analyst Doug Anmuth backed an Overweight rating and $38 price target on Peloton. He estimates that of the roughly 277M shares unlocking, about 144M are held by affiliated shareholders and roughly 133M are held by non-affiliates. The analyst said that while he recognizes the lock-up could pressure shares in the near-term, moving past the lock-up should ultimately serve as a positive catalyst as company fundamentals and execution continue to be "strong." Anmuth added that Peloton remains one of his best ideas in 2020.

SUNTRUST: Additionally, SunTrust analyst Youssef Squali said he remains bullish over the long-term on Peloton, noting that there will likely be more short-term pressure on the shares starting February 24. Squali said that during the company's most recent earnings call, management announced the lock-up agreement, which was originally set to expire on March 23. The analyst noted, however, that at the end of last quarter, about 27M of the 65M outstanding options were vested and are exercisable, which increases the total share count to approximately 307M.

WHAT'S NOTABLE: MKM's Rohit Kulkarni pointed out in his research note that Flywheel bike owners recently received an email indicating the company would stop selling its bikes and discontinue its at-home subscription service, and subsequently, Peloton posted an offer for existing Flywheel subscribers to join the Peloton community by trading in their Flywheel Home Bike for a refurbished Peloton Bike at no cost to them. The analyst said that while there is no publicly available data on the exact number of bikes involved, he believes the move is a positive for Peloton as he thinks the company could add roughly 60,000-90,000 new subscribers.

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Disclosure: None.


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