Some workouts seem to end just before they get a chance to get started. Peloton (NASDAQ:PTON) shares have been drifting lower this month, following a huge 48% bounce in November. The high-end fitness specialist had been a broken IPO through all of October, so it's had a lot of ups and downs in its brief publicly traded tenure.. 

December has been rough for Peloton. The bearishness began circling when a commercial it rolled out ahead of the holiday shopping season was widely lampooned for being out of touch. This week, we find the shares moving lower after a Citron Research article suggested that the stock should be trading at $5. Peloton isn't perfect, but it's probably not going to be trading that low anytime soon.

Peleton stationary bike with a live cycling session on the screen.

Image source: Peloton.

Cycling through the bear argument

Citron Research's Andrew Left likes to swing for the fences in his long and short calls, and sometimes he nails a stinker before the rest of the market follows suit. He's also wrong from time to time -- aren't we all? -- and that brings us to Tuesday's call arguing that Peloton will drop to $5 in 2020. 

Citron kicks off its bearish argument by illustrating how out of whack the stock's valuation is for a company with such a small subscriber base. He divides Peloton's $8.8 billion in enterprise value by its 562,774 connected fitness subscribers to arrive at the market valuing each Peloton subscriber at $15,361 (he rounds up the subscriber base to 600,000), an outlandish ransom relative to the eight other "peers" he offers up for comparison. 

There are a few holes in Left's opening argument, starting with the peer group. It's a motley crew that Citron is offering up as Peloton rivals, and Left seems to be using the terms "subscribers" and "users" interchangeably. Just two of the eight "peers" require a premium subscription for access -- discount gym operator Planet Fitness and Netflix -- and even those services cost less than half of Peloton's monthly connected fitness subscription of $39 a month. None of the so-called peers requires a four-figure investment in hardware, either. 

It's also worth clarifying that Peloton has 1.6 million members. If he's taking liberties with the denominator to the point of counting folks who have free access to a social networking or streaming site as subscribers, why not size up all of Peloton's members? The math would still support the argument, just not as outlandishly as it's presented. 

Left then drops another gem, putting out a disclaimer that he owns a Peloton. He will go on to point out that all someone needs to duplicate the Peloton experience is a phone mount on a cheaper exercise bike or treadmill -- and Peloton's cheaper $12.99-a-month digital membership. However, that doesn't duplicate the connected fitness experience of a Peloton-branded stationary bike or treadmill. 

Behind every bad bearish call is a naysayer who underestimates growth, and that appears to be the case here. Peloton's connected subscribers have more than doubled over the past year. In terms of engagement, the average member is performing a lot more monthly workouts than before. Retention rates are solid, something that isn't a surprise after making a $4,295 investment in a treadmill or shelling out $2,245 for a bike that doesn't go anywhere. 

If selling products at a premium to comparable wares and then tethering buyers to chunky subscription plans seems like a bad model, you may want to take that argument up with Apple. Naturally, Peloton isn't Apple, but it's a more fair comparison than the peer group of faded fads and ad-supported businesses that Citron went with here.

It's true that Peloton is risky. No one should be surprised given the inherent dangers that come with investing in IPO stocks. Peloton may be overvalued, but let's be fair and compare it to other sellers of big-ticket products with comparably priced subscription plans that are growing as quickly here. Bear arguments are always welcome, but it's no fun when they're not entirely fair.