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Nasdaq Record-Bound Again Despite Peloton Drop; Magnite Jumps

By Dan Caplinger - Feb 5, 2021 at 2:04PM

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Poor earnings hit the bike maker, but a smart deal sent shares of the programmatic ad specialist up.

Record performances for the Nasdaq Composite (^IXIC 3.33%) have become commonplace, and Friday brought another push into uncharted territory for the stock market benchmark. As of 12:30 p.m. EST, the Nasdaq was up about half a percent, adding to the all-time high that the index set at the close on Thursday.

Helping to lift the Nasdaq was Magnite (MGNI 6.22%), which announced a strategic move to bolster its grip on the programmatic advertising marketing. However, Peloton Interactive (PTON 4.39%) failed to impress shareholders in its much-watched earnings report, sending shares of the interactive fitness equipment maker lower despite the growth stock having seen big gains recently.

Peloton gets dropped by the climbing market

Shares of Peloton Interactive fell almost 8% early Friday afternoon. The maker of stationary bikes and treadmills has had huge demand, but it hasn't been able to execute well enough to take full advantage of it.

Person lifting weights next to Peloton treadmill.

Image source: Peloton Interactive.

Peloton's fiscal second-quarter financial report told the story. Revenue surged by 128%, topping the $1 billion mark. Peloton counted 1.67 million connected fitness subscriptions, up 134% from year-ago levels, and retention rates remained strong at 92% while churn was low at 0.76%. Peloton was profitable for the period, with net income of $0.18 per share.

Peloton sees the good times continuing. It projected having nearly 2 million connected fitness subscriptions by the end of the March quarter, and it sees revenue exceeding $4.075 billion for the full fiscal year.

Yet investors weren't happy about the continuing challenges that Peloton is having fulfilling its massive order backlog. The company cited delays at West Coast ports, and despite higher manufacturing output, long periods between order and delivery will remain problematic at least in early 2021. Peloton will keep investing to fix the problem, but until it's solved, the stock might have trouble pressing higher.

Magnite ignites big gains

Elsewhere, shares of Magnite soared 26%. The sell-side programmatic ad specialist announced a strategic acquisition that should help it take an even firmer grip on its niche growth area in connected television.

Magnite will acquire SpotX for $1.17 billion, in a deal that will create the largest independent connected TV and video advertising platform. The move will allow the combined company to provide even better support for those seeking to sell advertising on their platforms, taking advantage of the surge in interest in connected TV. At the same time, Magnite sees the acquisition also helping it serve ad buyers more effectively, making ad purchasing more efficient.

Investors will have to put up with some dilution, however. The purchase includes $560 million in cash plus 14 million newly issued Magnite shares. Yet with substantial cost savings possible from the combination of the two companies, Magnite believes that investors should be pleased with the acquisition and the prospects for accelerated growth that it will bring to the company.

Magnite has been an investor favorite lately, and it's looking to dominate connected TV advertising. It'll take effort, but given the fast pace of CTV growth, there's opportunity for Magnite to become an even more influential part of the advertising industry in the months and years to come.

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Stocks Mentioned

Magnite, Inc. Stock Quote
Magnite, Inc.
MGNI
$11.27 (6.22%) $0.66
Peloton Interactive, Inc. Stock Quote
Peloton Interactive, Inc.
PTON
$14.51 (4.39%) $0.61
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
^IXIC
$12,131.13 (3.33%) $390.48

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

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