What Happened: Shares of exercise equipment company Peloton (NASDAQ:PTON) fell 5.9% in the afternoon session as the major indices declined (Nasdaq down -1.70%, S&P 500 down -1.1%, Dow down -0.61%), while yields soared. Geopolitical tension heightened following reports on Saturday, April 13, 2024, that Iran launched drones and missiles at Israel, driving uncertainty about possible disruption to global trade and commerce should the tension escalate. Also, the Census Bureau report revealed March 2024 retail sales rose 0.7% compared to the previous month (ahead of market expectations for a 0.3% increase), suggesting consumption is strong amidst recent inflation concerns.
Prior to these reports, market volatility had picked up after the March 2024 CPI (Consumer Price Index - a gauge of the average price consumers pay for goods and services) report revealed inflation came in slightly hotter than expected, adding to fears that the Fed could delay rate cut plans in 2024.
As a reminder, the driver of a stock's value is the sum of its future cash flows discounted back to today. With lower interest rates, investors can apply higher valuations to their stocks. No wonder so many in the investment community are optimistic about 2024. We at StockStory remain cautious, as following the crowd can lead to adverse outcomes. During times like this, it's best to own high-quality, cash-flowing companies that can weather the ups and downs of the market.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Peloton? Find out by reading the original article on StockStory.
What is the market telling us: Peloton's shares are a little volatile and over the last year have had 64 moves greater than 5%.
The previous big move we wrote about was 5 days ago, when the company dropped 8% as major indices pulled back and yields soared after the Bureau of Labour Statistics reported CPI (Consumer Price Index - a gauge of the average price consumers pay for goods and services) for the month of March 2024 that came in slightly hotter than expected at 3.5% year on year (versus analysts expectations for 3.4%). According to the report, shelter and gasoline prices contributed more than half of the monthly increase in the index. The inflation print, while only slightly above expectations, is adding to fears that the Fed could delay rate cut plans in 2024. Following the inflation report, consensus estimate was for two rate cuts in 2024 (down from the previous consensus for three rate cuts).
Peloton is down 42.7% since the beginning of the year, and at $3.34 per share it is trading 66.3% below its 52-week high of $9.90 from April 2023. Investors who bought $1,000 worth of Peloton's shares at the IPO in September 2019 would now be looking at an investment worth $129.46.