Short-seller Citron Research has said on Tuesday that it expects the Peloton stock to decline by almost 85% to just $5 per share.
In its report titled "Investors Peddling Themselves into Frenzy," Citron Research compared Peloton to GoPro and Fitbit and said it expects its stock price to plunge to $5 per share.
The investor argued that while GoPro and Fitbit were once market leaders in their respective categories of wearable action cameras and fitness trackers, they were unable to keep up with the competition, leading to lower sales and profits.
Fitbit is now being sold to Google for around $2.1 billion or $7.35 per share, falling by around 85% compared to the stock's peak price in August 2015, following its initial public offering (IPO).
Citron argued that if one would examine the business model of Peloton, there was nothing in particular that makes it stand out and unique enough to be immune to competition. The investment company said: "Once you get past management's grandiose talks, you have a company that sells hardware and software."
Following the Citron report's release, Peloton shares fell by almost 6% to around $32, which is still above its IPO price of $29 in September.
Citron argued that "while Peloton has enjoyed a first mover advantage, the lack of differentiation of its bike has finally caught up to it as the competition is not only making virtually identical exercise bikes but ones that are both more affordable and functional."
"Competition is so intense that some competitors are even offering to give the exercise bike for free with a digital subscription. Citron believes Peloton's glory days of hardware sales are in the rear-view mirror," Citron added.
Peloton recently garnered controversy due to its holiday ad, which featured a husband giving his already thin wife a Peloton stationary bike. People criticized the ad for being sexist, relying on marital stereotypes and maybe even depicting spousal abuse.
