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Author: Alan LittleDate: 2021-03-09

Peloton (PTON) +1% after MKM identifies buying opportunity for investors

Peloton (PTON) shares eased 1% higher on Monday after MKM Partners said that there is now an opportunity for investors to buy the exercise equipment company’s stock following the recent selloff. 


After surging in 2020, Peloton shares have slumped around 34% since early February after it warned that pandemic-related challenges could hit deliveries and dent future earnings. 


MKM analyst Rohit Kulkarni is not concerned though and outlined ways that Peleton can “keep on pedaling” in a new research note released at the start of the week.  


Calling Peloton the “pandemic’s poster child” after demand for its goods and services skyrocketed due to stay-at-home measures that shuttered gyms, Kulkarni spoke positively of the company’s investments and its network value. 


Citing Peloton’s $100m investment in freight to improve deliveries, Kulkarni said that this was evidence of a renewed focus on customer satisfaction.  


He added that these measures are already showing signs of coming to fruition. 


Kulkarni also warned against looking at core metrics such as workouts per member, advising instead to consider the combined value of all its social features, media offerings and instructors. 


He noted: We believe the value of the network is greater than the sum of the individual parts, and it continues to grow at a greater clip than the growth in the size of the network. 


One potential downside for Peloton is the winding down of COVID-19 restrictions with the rollout of vaccines, and how this will impact on consumer behaviour. 


This uncertainty means that Peloton will trade lower than its growth rates should indicate, which gives investors an opportunity to buy in now, with the potential for long-term gains. 


Peloton shares jumped after the Nasdaq opened on Monday, but were relatively flat at $105.39 by late morning.  


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