Peloton the Short Side
With the pandemic ending soon I’ve been looking at some short options to trade. Some of the biggest gainers like Peloton were amazing on the way up. Demand was so hot you had to wait months to even get a bike. Their subscription services were through the roof hot. They had some major trouble a few months ago with shipping / cargo. In-fact they are still having those issues. So much so they decided to announce a US based manufacturing plant that will cost upwards of 500 million dollars and will not be completed until 2023.
Major inflationary pressures I believe that are not in current revenue numbers. The cost of carbon fiber steel has increased in Aug 2020 from $459 to $1511 today. A near 300% increase and still climbing quickly. These pricing pressures to manufacture their equipment must hit their bottom line soon and thus I believe will impact earnings next quarter.
Next take a look at shipping issues. Pricing on shipping is still increasing. If they can’t deal with shipping issues until 2023, I believe we will see more pressure on the bottom line.
Then, how many people do you know that are getting "back out" to the gym. I was just at my local LifeTime fitness and it was SOLID packed. Granted, I’m in Tx but I’m hearing that places are opening back up. I believe while a lot of people will be scared for a while longer, that more people will cancel their Peloton subscriptions and want to get back into society and socialize at the gyms. Also you’ll find a large subscription churn if consumers are getting hit with inflation pressures on other goods/services which we are seeing. They will cut expenses where they can and subscriptions like Peloton would go before Netflix and chill…
Lastly lets look at the major shareholders of the company. This is primarily composed of mutual fund companies. Vanguard Group invested a hella lot back in April-July 2020. They went from 3 million shares to today 22 million shares. I believe with the re-opening trade and headwinds described above these mutual fund companies are severely overweight and will rebalance very very soon if pricing continues to decline.
I’m noticing some pressures around Options trading. Their appears to be a market maker who is selling quite a bit of puts and then like today on low volume increasing pricing with no underlying news, on a down dow day…. Sus for sure…
With the above, I believe that some of the Covid plays should be considered for the short side trade.
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June 11, 2021 at 11:15AM