Stock Of The Week: Expert Opinion On What Stock To Watch
Experts share their opinions to help with your investment decisions.
Michael Kamerman, CEO of Skilling, shares his opinion on what stock you should watch this week.
2022 arguably hasn’t been the most accommodating environment for traders. With many stocks tumbling this year, including titans such as Google and Microsoft who are down 23-24% from their all-time highs, as well as other household names like Disney and Facebook (Meta) who are 47-48%, many companies are seemingly bearing the brunt of the “post-pandemic recovery”.
This is currently the case for Peloton, which is now down by over 90%.
Following its IPO in September 2019, its trading price began $2 below its IPO price at $27 before hitting $17.70 in March 2020. The pandemic did however help boost its value, with gyms closed, social distancing measures and limits to time outdoors put in place, people embraced Peloton’s social and physical offering, resulting in the stock trading at all-time highs of $171.
Looking back, traders who invested while the price was low and got out when the price reached new highs were blessed with decent returns. Those who held on may not be feeling so good about their position now that the stock is trading back beneath pre-pandemic lows.
When any stock reaches low prices similar to Peloton, traders often question whether this represents an opportunity to buy while low, ie: a tradeable low, or if this will become the ‘normal’ price. While buying something at a 90% discount may seem like a fantastic deal, the case isn’t as straightforward when it comes to navigating and predicting global financial markets.
Some may argue that Peloton’s share price is down for a reason other than general market lows, such as the classic case of a company being overvalued during a bull market due to short-term demands, before hitting its actual price soon after. Others may instead believe that the company still has potential post-pandemic and traders should get on board whilst value is low.
In any case, what one can do is look at the facts. In the last quarter, Peloton reported a total of approximately 7 million members with 2.96 million connected fitness subscriptions. However, they also recorded their biggest quarterly loss of -$757 million since going public and have borrowed $750 million to recapitalise. As well as this, the company has more inventory than anticipated, with vast amounts of stock sitting in warehouses rather than homes.
Nevertheless, the company is continuing to push for new products after recently soft announcing on Twitter that their rowing machine is on the way.
On many levels, FaaS (Fitness-as-a-Service), or ‘connected fitness’ is a promising concept in the digital era. One crucial question for investors to now consider is whether that idea can translate into a solidly profitable business, especially as the global economy searches for a post-Covid re-balance.
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Not investment advice. Past performance does not guarantee or predict future performance.