Current-Quarter Forecast Weighs Heavy on Peloton Stock

A spike in demand has raised some logistics issues for PTON

Assistant Editor
Feb 5, 2021 at 10:34 AM
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The shares of Peloton Interactive Inc (NASDAQ: PTON) are plummeting this morning, last seen down 7.8% at $145.28, despite the fact that the stay-at-home workout staple reported fiscal second-quarter earnings that topped analysts' estimates. Revenue also exceeded Wall Street's expectations, with Peloton notching its first billion-dollar quarter. Putting weight on the equity this morning, however, is PTON's current-quarter forecast, which missed expectations. The company said it is dealing with a pandemic-related surge in demand, and announced it will incur extra costs in the near term by investing more than $100 million in air freight and expedited ocean freight in order to help speed up deliveries. 

Following the earnings release, PTON earned at least seven bull notes, the biggest of which came from J.P. Morgan Securities, which lifted its price target by $55 to $200. The majority of analysts were already optimistic toward the security coming into today. In fact, 20 of the 23 in coverage held a "buy" or better rating. Meanwhile, the stock's 12-month consensus target price of $155.42 is a 5.6% premium to current levels.

Peloton stock is now cooling off after soaring above the $156 level for the first time in well over a week during yesterday's session. The 40-day moving average has also moved in as resistance, after supporting the equity since early December. Longer term, PTON has added 404.8% year-over-year.

Today's options pits, meanwhile, are seeing plenty of activity. So far, 62,000 calls and 45,000 puts have crossed the tape --  five times the average intraday amount, with volume pacing in the 99th percentile of its annual range. Most popular is the weekly 2/5 150-strike call, followed closely by the 155-strike call from the same series, with positions opened at both.

For those looking to speculate on PTON's next move with options, premiums are quite affordable at the moment. The security's Schaeffer's Volatility Index (SVI) of 83% sits in the relatively low 20th percentile of its annual range. This means options traders are pricing in relatively low volatility expectations.

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