Please ensure Javascript is enabled for purposes of website accessibility

Why Peloton Interactive Stock Popped 10% This Morning

By Rich Smith - May 15, 2020 at 2:15PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A big hedge fund is purring over Peloton.

What happened

Shares of exercise bike-maker Peloton Interactive (PTON 7.66%) popped nearly 10% in early trading Friday and is hanging on to the majority of those gains in midday trading. As of 1:45 p.m. EDT, Peloton stock remains up a good 8.9%.

So what

Lacking any other news to explain the stock's move, it would appear that investors are reacting (positively) to an SEC filing just out today, which shows that hedge fund Tiger Global Management has taken a 4.15 million-share stake in Peloton Interactive.

As TheFly.com relates, Tiger Global paid $110.3 million to acquire the shares in the first quarter -- 4.15 million shares works out to just under a 1.5% stake in the company, and is worth more than $186 million at today's prices. In other words, in a matter of months, Tiger Global's investment has already charged 69% higher.

Leaping tiger

Image source: Getty Images.

Now what

That's not half bad...for Tiger Global! And yet, it does raise the question of whether investors are acting wisely in rushing out and buying Peloton stock today, after the gains have been made.

Peloton had a decent quarter earlier this month, reporting 65% sales growth and exceeding analyst expectations. However, at a $12.8 billion market capitalization today, but with no GAAP profits and no free cash flow to its name, Peloton Interactive is hardly the definition of a value stock right now.

While I applaud Tiger's foresight in buying the stock ahead of a well-received earnings report, I'm really not interested in trying to chase this now-overpriced bull any higher.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Peloton Interactive. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Peloton Interactive, Inc. Stock Quote
Peloton Interactive, Inc.
PTON
$11.94 (7.66%) $0.85

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
373%
 
S&P 500 Returns
122%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/10/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.