Peloton (PTON 5.52%) has been in the news quite a bit lately -- and often for less-than-ideal reasons. From staff layoffs and a CEO change to lowered guidance, supply chain issues, and insider selling, there's been a lot for investors to keep track of in recent weeks. Recently, it also emerged that several companies could be in talks to acquire Peloton, including Amazon.
In this segment of Backstage Pass, recorded on Jan. 19, Fool.com contributors Trevor Jennewine, Rachel Warren, Jose Najarro, and Danny Vena discuss several potential red flags for Peloton.
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Trevor Jennewine: I feel the same way that Danny does for the most part there. A couple of different questions here.
In response to the insider selling, that doesn't bother me. I like to see insider ownership, but it's not a deal breaker to see insider selling. I think there's a lot of different reasons an insider might sell stock and I think very few of those reasons are nefarious.
As far as the supply, or Peloton itself, I have the same reservations. I think it's an expensive upfront investment. I think if you're willing to pay that much for something in the fitness sphere that you're probably very invested in your own personal health and wellness and you probably have a gym membership.
That being said, I like to go to the gym every day, but I am interested in potentially getting a Peloton. But big picture, I have concerns about this having staying power.
Then as far as the supply chain situation, I absolutely think we could see disruptions through the end of this year, maybe into the latter part of next year or beyond it. I don't like to make predictions, but yes, I think that can last to the end of 2022.
Rachel Warren: What about you Jose?
Jose Najarro: For me, pretty much similar to everybody else. Insider selling is a hit or miss. Most of the time I actually ignore it. Everyone has a reason to sell and it could be for multiple reasons outside of the business like Danny mentioned.
But if I do follow the company and if I see an insider sell a huge portion outside of their normal, that might throw a red flag. If it's a huge, huge position compared to their overweight that might throw some flag. The other thing I do want to mention is the disruptions, supply chain. I think yes, it's going to continue to hit like Trevor mentioned.
I think we're going to see it very similar to we're seeing it on Peloton on big items, items that weigh pretty heavy. That was insane. I was looking at the prices. It was their treadmill went from almost $2,500 up to $2,850.
I mean, soon we're going to start seeing under the used cars in the CPI data use fitness prices increase there. I think people will be able to sell their used Peloton's for higher prices than they probably pay for them brand new. I think that's pretty interesting there.
Rachel Warren: Absolutely. This was interesting. Focusing on Peloton. I like the company, I think the business is struggling to remain relevant as we enter new phases of the pandemic. I wonder what the future holds for the company. I think it could very much rebound, but I do think it's going to be a bit of an uphill battle.
But we'll see, we don't know the future and maybe after it does some restructuring of its business and takes stock of the current situation it's in, things will look a little bit differently than they do right now. I don't think that insider selling alone would cause me to dump the stock.
I think, particularly, if there is a lot of other positive factors that are present, and my underlying thesis for the business remains strong, I don't think that factor alone is something that would cause me to hit the sell button. But I think it's something to pay attention to. I think it's important to review the holdings that you have and check and remain that your investment thesis for those companies remain strong.
In terms of the supply chain disruptions, I do think those will be with us for a while. Sad to say, I don't think this is something that is going to disappear. I think that well into 2022, we're going to be continuing to see this.
I think it's because when you look at the global supply chain, I think the fact that there is this global supply chain, this is the issue. We might have certain rules that we have in place here in the U.S, as we're processing the imports and exports of goods. But we're very reliant on all these other steps in the supply chain.
Whether that be in China, which they have a zero COVID policy so that can cause a port that's responsible for huge part of the world's commerce to shutdown overnight. Then there might be different rules in a different country, in Europe perhaps where something's coming from.
I think we live in an age where we're very interdependent on each other in terms of the supply chain. I don't think this is something that's going to go away overnight. There was a report I saw by a company called TechTarget and they quoted someone who's a principal analysts at accompany called Inner Harbor solutions.
He was saying "the supply chain disruption is part of a larger global resources disruption that is affected production, business, investment, and labor". He doesn't think the disruption will be going anywhere, at least not in the first half of this year.
Companies are going to have to be planning and factoring this into their business plans, I think, for some time to come. Real quick Danny, did you have another thought on this you wanted to share?
Danny Vena: I did actually. I want to share my screen here for a minute because I did some quick research on this while folks were talking and just, it was pretty much what I thought. Here's a copy of Peloton's latest proxy statement.
The CNBC article noted that John Foley had sold $119 million worth of stock. If you go back to here, he owns more than 17 million shares of stock or 42% of the outstanding stock at the time of this proxy statement earlier last year.
I did some quick math it looks like he has in the neighborhood of $542 million worth of stock, and that's the Class B shares, that's not the Class A shares. If you look at that in context, essentially what that means is there's no issue there.
Rachel Warren: Well, thank you for sharing that. I think there's another key lesson there, don't buy or sell a stock based on headlines. Look into the facts behind the story and look and see what's going on.
Because as Danny, showed the context there for that insider selling specifically, it makes it a little less dire than it might appear at first glance.