One of the standouts of today's morning trading session has been Peloton Interactive, which logged a -1.3% drop and underperformed the S&P 500 by -1.0%. The exercise equipment stock is now trading at $7.25 per share and is -41.54% below its average target price of $12.41. Analysts have set target prices ranging from $4.5 to 20.0 dollars per share, and have given the stock an average rating of buy.
For the greater market's outlook on the stock, we can use Peloton Interactive's short interest as a proxy. The short interest represents the proportion of the float's shares that are tied to short positions, meaning that the investor believes the stock will decline in the future. Here, the stock's short interest is 12.4% which means the outlook is split.
Short selling involves borrowing shares and then selling them at current market prices. In the successful version of the strategy, the shares are purchased at a lower price at some time in the future. The investor then returns the shares to the lender, and keeps the profit made on the sell/buy transaction.
One way to get an idea of the market sentiment on a stock is to check its rate of institutional ownership. In the case of Peloton Interactive, institutional investors own 88.5% of the shares, which indicates they have a very high stake in the company. What does this really tell us?
Institutional investors such as hedge funds, investment firms, and wealth managers devote significant resources to identifying good investments. If they have decided to invest in PTON, it probably means they believe it is a solid investment choice.
But it could also mean they are buying up shares in an effort to acquire the company or to get seats on the board of directors. Also bear in mind that institutions are fallible (just maybe not quite as fallible as the average retail investor), so they may simply be wrong when they think they've found a good stock.
To sum up, Peloton Interactive is probably the subject of mixed market sentiment because of an analyst consensus of strong upside potential, a buy rating, an above average percentage of its shares sold short, and a significant number of institutional investors. At Market Inference, we believe that any investment decision should be preceded by an in-depth analysis of the company's fundamental values and a comparison with similar stocks.
Here's a snapshot of some important facts to keep in mind about PTON:
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The stock has trailing 12 month earnings per share (EPS) of $-6.98
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Peloton Interactive has a trailing 12 month Price to Earnings (P/E) ratio of -1.0 compared to the S&P 500 average of 15.97
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Peloton Interactive is a Consumer Discretionary company, and the sector average P/E and P/B ratios are 22.33 and 3.12 respectively
