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Author: Alan LittleDate: 2022-01-17

Peloton (PTON) dropped from Nasdaq 100 Index, shares -3%

Peloton (PTON) shares fell on Friday after officials for the Nasdaq 100 Index said that it would be replaced by Old Dominion Freight Line (ODFL) next week.

Peloton (PTON) shares dipped 3% on Friday on news that the fitness equipment company is set to be dumped from the Nasdaq 100 Index (NDX) due to its low market valuation.

Officials for the benchmark tech indices said that Old Dominion Freight Line (ODFL) will take Peloton’s place on the Nasdaq 100, which features the largest nonfinancial companies, when trading gets underway next Monday (24th January).

Peloton shares have slumped 78% during the last six months, and its market value at Friday’s close, $10.35bn, is the lowest on the NDX and more than $9bn less than the next on the list, Splunk (SPLK).

After thriving during the pandemic as people embraced stay-at-home fitness, Peloton has struggled to maintain its momentum amid a slowdown in sales, which prompted a sudden decision last month to sell $1bn in shares to raise capital.

The New York-based company also admitted that supply chain problems, rising costs and a $400 discount on its core bike product would pressure profit margins in the short term.

All of this negativity meant that investors were heading to the sidelines on Friday, though the severity of Peloton’s decline did ease in the afternoon as it ended 2.55% down at $31.33.

While Peloton has taken a battering in recent months, Truist analyst Michael Swartz believes that it might now be time for its shares to “warm up”.

Pointing to a recent survey, Swartz said that interest or participation in exercise at home hadn’t actually dropped off despite the reopening of gyms.

He added: “This reinforces our belief that habitual changes made over the past 22 months will ultimately yield a structurally larger at-home fitness TAM [total addressable market].”

Truist is not that confident yet though, noting that it’s too early for it to move from its current hold rating for PTON.

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