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Why Peloton Stock Flopped on Friday

By Eric Volkman – Jan 14, 2022 at 5:30PM

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The company is getting jettisoned from a prominent stock index.

What happened

Shares of popular next-generation exercise machine company Peloton Interactive (PTON 7.29%) ended the week on a down note. The stock fell by nearly 4% on Friday, after it was dropped from a high-profile equity index.

So what

After market hours on Thursday, Nasdaq (NDAQ 1.19%) announced that Peloton stock would no longer be on its Nasdaq-100 Index. It is being replaced by that of logistics company Old Dominion Freight Line, effective prior to market open on Jan. 24.

Exhausted person lying on the floor after a workout.

Image source: Getty Images.

Old Dominion will also replace Peloton on two associated indexes, the Nasdaq-100 Equal Weighted and the Nasdaq-100 Ex-Technology.

The Nasdaq-100 is a large-cap index that's composed of the most highly capitalized stocks traded on that exchange. With a stock price that has generally withered over the past year or so, Peloton has seen its market cap decline precipitously. It currently stands at just over $10 billion; last year around this time it was over six times that figure.

Now what

Inclusion on, or exclusion from, a closely watched stock index isn't reason alone to buy or sell a stock. Still, it's concerning when a company gets its membership to such a high-profile club canceled. This doesn't help its reputation as a choice investment, plus it drops from the radars of the many index funds that trawl the Nasdaq-100 and its ilk for their portfolios.

This is the latest in a growing stack of setbacks for Peloton, which has generally fallen out of favor as it's seen by many to be a coronavirus play. But this might provide an opportunity to buy the stock at a relative bargain, since the company's business model is solid and it has built a large and generally loyal customer base. 

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool owns and recommends Old Dominion Freight Line and Peloton Interactive. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.

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