Raymond James doesn't think the ad will negatively impact holiday sales
Shares of Peloton Interactive (PTON) continue to be in focus after the fitness company's stock slid yesterday amid backlash related to the company's new TV ad, which is being called out as tone deaf on both network television and social media. Raymond James analyst Justin Patterson said he thinks the ad will get pulled and should not affect holiday sales.
AD BACKLASH: Peloton's latest U.S. ad campaign, "Gift That Gives Back," has received significant backlash on social media. The ad, which was first released in mid-November and is being shown on network television, as well as on YouTube and other sites, features a woman working out over the course of a year after being gifted a Peloton bike, which struck many viewers as tone deaf, sexist, classist and even "dystopian." A Peloton Bike retails for $2,245, and membership for the company’s interactive classes costs $39 a month.
According to The New York Times, there are rumors the ad could be taken off the air. According to the report, despite speculation about the stock price drop and the rumors that the ad could be taken off the air, Peloton does not believe that any stock movement was tied to the adverse response to the holiday ad. The company told the publication that it stood firmly behind the commercial. On Tuesday, Peloton told The Times that it had received "tremendous" support for the ad, and that some customers described themselves as "inspired" by the commercial.
The stock decline on Tuesday erased nearly $942M from Peloton's market value in a single day, the biggest single-day drop for the company since October.
BACKLASH SHOULDN'T AFFECT SALES: Raymond James analyst Justin Patterson told investors on Wednesday that the "social outcries" and negative press about the ad "bears monitoring." However, Patterson said he thinks that while the ad will get pulled, he noted that Peloton "has been a meme in the past" without it having hurt the company's trends. In addition, Peloton "got an ad right" as its U.K. ads are garnering 6.7M views over two weeks, which Patterson said is "dramatically more" than other recent Peloton ads there. The analyst does not think the U.S. ad backlash will do much to affect holiday sales.
WHAT'S NOTABLE: Peloton went public in September following the disappointing IPOs of Uber (UBER), SmileDirectClub (SDC) and Pinterest (PINS) earlier this year. In October, food-delivery startup Postmates, which was also expected to go public this year, told its IPO advisers that it is delaying its IPO due to market conditions, Recode's Theodore Schleifer reported, citing people familiar with the matter. Additionally, other high-profile startups like Lyft (LYFT) and Slack (WORK) have largely bombed on the stock market since going public this year, while WeWork (WE) recently pulled its IPO. Postmates CEO Bastian Lehmann recently said at a startup conference that "The reality is that we will IPO when we believe we find the right time for the business and the right time in the markets. And if you look at the markets right now, they are, I believe, a little choppy," adding that "They're a little choppy when it comes to growth companies specifically."
PRICE ACTION: In morning trading, shares of Peloton are up 2.4% to $34.28, above its IPO price of $29. On Tuesday, the stock had declined roughly 9%. The company had priced 40M shares at $29.00, at the high end of the range set for its initial public offering, and opened at $27.00 per share on Thursday, September 26.