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Cathie Wood ARK ETF Gives Peloton a Vote of Confidence After Treadmill Recall

By Rich Duprey – May 6, 2021 at 7:19AM

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Wall Street seems divided over whether the massive recall is a buying opportunity.

Peloton Interactive (PTON 1.54%) having to recall all of its treadmills due to the possibility they could cause life-threatening injuries to users, children, and pets has a number of analysts questioning the company's valuation.

But there is one Wall Street guru who did not wonder whether Peloton was still overvalued after the news yesterday caused its stock to tumble. Star money manager Cathie Wood's ARK Next Generation Internet (ARKW 0.49%) exchange traded fund (ETF) scooped up an additional 141,000 shares, spending around $11.7 million to give the leader in connected home fitness a needed vote of confidence.

Man looking at treadmill screen

Image source: Peloton Interactive.

Analysts wondered whether the massive recall, which included over 126,000 treadmills -- the entire inventory of Tread and Tread+ treadmills sold -- meant Peloton had exceeded its capacity to effectively manage its business.

With the Tread+ running as much as $4,300 for a unit, another analyst suspected the home fitness specialist's growth thesis was undermined because the lower-cost Tread, which goes for around $2,500, would now not be much of a contributor to the company's fiscal 2022 year, as originally planned.

Wood seemingly had no such qualms. She quickly added another tranche of Peloton stock to her portfolio, giving the ETF over 1.5 million shares in total with a market value of almost $124 million

Peloton Interactive is a top 20 holding in the ETF's portfolio and represents over 2% of the total. 

That outlook is seemingly in line with Baird analyst Jonathan Komp, who says he "would aggressively buy the dip" in the stock's price. While the recall will be a setback to performance, it is undoubtedly a short-term hiccup.

Rich Duprey 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.

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