Citron Research Presents Peloton – Investors Pedaling Themselves into Frenzy

2020 Target Price – $5

Before we even start with the narrative, we are obligated to show the only chart that matters.

Unless Peloton invents a piece of equipment that works out for you – this is going to $5 (which is still a $1BN-$2BN market cap).

Looking back over the past 5 years, one of the biggest trading regrets held by Citron was not being more aggressive and staying short GoPro from the article we published in late 2014.

While Wall St was giddy over the new “must-have product”, Citron maintained that GoPro sold a consumer electronics device that would eventually show decelerating growth as competition came into the marketplace.  At the end of the day no matter how much lipstick Wall St put on this company, it was just a camera – the rest is history.

Disclosure:  Yes, we own a Peloton bike just like we owned a GoPro, Fitbit, Blackberry, and even an ab roller… but who cares.

In this report, we won’t restate the obvious points that have been made by numerous short-sellers regarding Peloton’s future.  These include (but are by no means limited to):

  • Obvious comparisons to GoPro and Fitbit
  • History of fitness products in the public marketplace
  • Dependence on the spin class trend and fitness fads
  • A marketing plan that shows a niche audience
  • The disingenuous rhetoric of management on the value proposition of Peloton ownership vs. a gym membership

Instead, we will focus on clear flaws in the Peloton business model and a management team that has been overly promotional while trying to justify an unrealistic valuation that is disconnected from all reality in the post-WeWork economy.  Combine this with a share structure that is designed to make long term shareholders sweat and we have all the makings of a compelling short.

Once you get past management’s grandiose talks, you have a company that sells hardware and software.