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Peloton short squeeze? PTON stock shorting interest on rise in run-up to Amazon deal news price bump

By Jenny McCall

12:30, 25 August 2022

A image of a Peloton logo on a bike
The current percentage of shares shorted for PTON is 11.53% - Photo: Shutterstock.

Embattled fitness group Peloton (PTON) has struck a deal with Amazon (AMZN) to sell its stationary bikes, equipment, and apparel on the online retailer’s platform.

PTON, which made a name for itself during the pandemic as furloughed and remote workers found more time to devote to getting fit, is now attempting to regain lost profits and announced the new partnership on Wednesday.

“We want to meet consumers where they are, and they are shopping on Amazon,” Kevin Cornils, Peloton's chief commercial officer, said in a statement.

News of the partnership helped the PTON stock price to surge by 20%. So, do investors believe a partnership to sell its equipment on Amazon will spark a turnaround in the Peloton share price, or could the price surge - shares were up a further 2% on Thursday - be an opportunity for short selling?

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Peloton Interactive (PTON) share price chart

Is PTON a winner for short selling?

PTON, which released its fourth-quarter earnings on Thursday, said in its quarterly report: "The naysayers will look at our Q4 financial performance and see a melting pot of declining revenue, negative gross margin, and deeper operating losses."

"They will say these threaten the viability of the business. But what I see is significant progress driving our comeback and Peloton’s long-term resilience. Important milestones reached include new executive leadership, renegotiated supply contracts, and significantly reduced cash outflow," CEO Barry McCarthy said in a statement on Thursday.

PTON, reported an operating loss of $1.2bn (£1.0bn) in its fiscal fourth quarter and revenue came in below Wall Street expectations.

But despite the dissapointing result, PTON is an interesting stock for investors.

According to MarketBeat, the current percentage of shares shorted for PTON is 11.53% and experts believe that anything about 10%, is considered to be a stock with a high short interest ratio.

In addition, reserach group Schaeffers Research, said short interest has been on the rise for PTON, up 10.7% in the most recent two-week reporting period. "Now, the 38.25m shares sold short account for a healthy 12.7% of the stock's available float," a statement from Schaeffers reserach said. 

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Poor results

Despite the PTON stock price surge on Wednesday, the group's share price has fallen 62% this year, as the reopening of gyms after the Covid lockdowns led to PTON losing a vast amount of its subscribers. PTON is also struggling to sign up new subscibers to its online workout services.

Regardless of the group falling on hard times, analysts still believe PTON is a winner.

“We believe Peloton (PTON) is redefining fitness, based on its convenience and relative value versus other premium offerings. As the company continues to try and grow its subscriber base, we forecast subscription contribution margin will exceed 70%, with churn remaining minimal,” Jason Helfstein, an analyst at Oppenheimer, told Capital.com.

Amazon (AMZN) share price chart

Increasing pedal power

This year, Peloton (PTON) switched gears and removed its CEO John Foley, replacing him with the former chief financial officer of Spotify, Barry McCarthy. Earlier this month, PTON also announced it would have to make job cuts and would shift its delivery work to third-party vendors, as well as reduce the number of stores it has in the US.

“There will be hopes Peloton will turn a corner with a new CEO in the hot-seat and plans for a dramatic slimming down in size with reports that 2,800 jobs are to go,”  Susannah Streeter, senior investment and markets analyst, at Hargreaves Lansdown wrote in a note.

Now the Amazon deal has been signed, Peloton’s bike, which is currently listed at $1,445 (£1,221), its workout mat, dumbbells, and glass water bottle, will all be available to purchase on the Amazon (AMZN) site.

“Peloton has one foot already firmly in the much-trumpeted metaverse, with its die-hard fans still deeply hooked to virtual sessions. That’s why the company is so attractive to big hitters like Nike (NKE) and Amazon (AMZN). If it can shape up and get back on a recovery trajectory in terms of sales, there may well be more potential suitors eager to jump into the alternative reality of fitness,” Streeter added.

Markets in this article

AMZN
Amazon.com Inc (Extended Hours)
194.35 USD
-0.92 -0.470%
PTON
Peloton Interactive Inc (Extended Hours)
3.65 USD
0.11 +3.150%
NKE
Nike Inc (Extended Hours)
73.50 USD
0.08 +0.110%

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