Why I’m Holding My Nose and Picking Up Some Peloton
This stock stinks, but guess what’s looking strong? Also, let’s see some recent trades and news in the $10K Portfolio.
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Peloton Interactive (PTON) is an old “Stocks Under $10” name that I never brought over to the “$10K Portfolio.” For good reason. Though I like the idea and I do enjoy that kind of exercise enough to engage in it fairly often, the stock stinks. This morning, Morgan Stanley downgraded PTON to Underweight (sell-equivalent) from Equal Weight (hold-equivalent) with a price target of $4.50, down from $5.
According to Morgan Stanley, Peloton’s “top of funnel has meaningfully narrowed” over the past few years as gross subscriber additions have fallen roughly 78% from the peak. These are the thoughts of analyst Nathan Feather. The good news for Peloton might be that Morgan Stanley’s Feather is rated at just one star out of five by TipRanks, if that tells you anything about his performance…. Over two years, he has a success rate of 40% and has compiled an average return of -2.2%.
Feather believes that this view reflects structural headwinds for Peloton, as consumers are shifting toward strength training and gyms and perhaps away from training at home, or on expensive equipment. As the company’s $50 per month subscription is its core driver of earnings, a declining base will weigh on the potential to sustain profitability over time. Feather believes that negative revisions to estimates, the lack of near-term catalysts, and business uncertainty terminal will continue to constrain Peloton’s multiple.
In addition, analyst Arpine Kocharyan of UBS was assigned coverage of PTON. She kept her firm’s “buy” rating on the stock, but cut its target price from $11 to $10. She does point out the strong balance sheet in her note and believes that $93 million worth of net debt up against a cash position of $1.2 billion provides significant flexibility for the company. Kocharyan is also rated at one star out of five by TipRanks. Over the past two years, she has compiled just a 40% success rate and an average return of -3%.
Why Am I Telling You All This?
Simple. I noticed the balance sheet. I noticed the small debt load. I noticed the cash position. I have been considering the initiation of this name to this portfolio. I am going to act on that thought, albeit in small size, this morning after publication.
Portfolio News
- Evolv Technologies (EVLV): TheFly is reporting that on Tuesday morning, Ladenburg initiated coverage of EVLV with a Buy rating and $8 price target. I do not yet have the name of an analyst, so I cannot dig into past performance.
- Planet Labs (PL): On Friday, analyst Ryan Koontz of Needham was assigned coverage of PL by his firm. Koonts kept a “buy” rating on the stock, while setting a target price of $40. Koontz is rated at five stars out of five by TipRanks. Over the past two years, he has compiled only a 40% success rate but has posted an average return of 42.4%.
On Friday, analyst Michael Latimore reiterated his “buy” rating on PL, while cutting his target price from $50 to $40. Latimore is rated at four stars out of five by TipRanks. Over the past two years, he has compiled just a 37% success rate but has posted an average return of 16.9%.
On Friday, analyst Jeff Van Rhee of Craig-Hallum reiterated his “buy” rating on PL, while cutting his target price from $49 to $35. Van Rhee is rated at four stars out of five by TipRanks. Over the past two years, he has compiled just a 43% success rate but has posted an average return of 6.4%.
On Friday, analyst Gregory Pendy of Clear Street reiterated his “buy” rating on PL, while cutting his target price from $53 to $51. Pendy is rated at one star out of five by TipRanks. Over the past two years, he has compiled just a 38% success rate while posting an average return of -0.6%.
- Smith & Wesson Brands (SWBI): On Friday, analyst Mark Smith of Lake Street reiterated his “buy” rating on SWBI, along with his $16.50 target price. Smith is rated at four stars out of five by TipRanks. Over the past two years, he has compiled just a 47% success rate but has posted an average return of 5.2%.
Friday’s Intentions vs. Actual Trades
- Sell 20 shares of PL at or close to the last sale of $20.22.
- Nothing Done. Price was more than $2 against us by the time of publication.
- Sell 20 shares of SWBI at or close to the last sale of $13.88.
- Sold 20 shares of SWBI at $12.95.
Tuesday’s Intention
- Purchase 10 shares of PL at or close to the last sale of $8.10.
- Purchase 25 shares of PTON at or close to the last sale of $5.07. We’ll start with a target price of $9.
Current Positions
Long 100 shares of ALTO at $4.5125. Target Price: $6.50. Last sale: $4.05.
Long 40 shares of ASPN at $5.23. Target Price: $10. Last sale: $4.90.
Long 100 shares of EVLV at $5.7883. Target Price: $8.50. Last sale: $5.09.
Long 100 shares of OCUL at $8.3545. Target Price: $11. Last sale: $10.59.
Short one OCUL $11 Sep 18th call at $1.65, Last sale: $0.34.
Long 225 shares of ONDS at $8.2091. Target Price: $12. Last sale: $7.63.
Long 50 shares of PL at $23.5514. Target Price $33. Last sale: $18.10.
Long 5 shares of RKLB at $77.936. Target Price $97. Last sale: $65.00.
Long 100 shares of SOFI at $15.8511. Target Price: $24. Last sale: $18.19.
Short one SOFI $22 Nov 19th call at $1.20, Last sale: $0.79.
Long 50 shares of SWBI at $14.0414. Target Price: $19. Last sale: $12.87.
Long 85 shares of VELO at $12.0971. Target Price: $18. Last sale: $11.55.
Cash: $1,545.39.
Portfolio Value: $9,994.31, down very small from inception on March 24.
At the time of publication, Guilfoyle was long VELO, SWBI, SOFI, RKLB, ONDS, PL, OCUL, EVLV, APSN, ALTO, LMT, RTX equity; short SOFI, OCUL.
