Merion Road Capital Management, an investment management firm, published its first-quarter 2022 investor letter – a copy of which can be downloaded here. Merion Road Capital’s long-only strategy was down 14.3% in the first quarter of 2022. This is roughly comparable to its loss in Q1 2020 during the covid sell‐off. The obvious difference between the two periods is their relative (under)performance versus the broader market. Try to spend some time taking a look at the fund’s top 5 holdings to be informed about their best picks for 2022.
In its Q1 2022 investor letter, Merion Road Capital mentioned Peloton Interactive, Inc. (NASDAQ:PTON) and explained its insights for the company. Founded in 2012, Peloton Interactive, Inc. (NASDAQ:PTON) is a New York, New York-based exercise equipment company with an $8.3 billion market capitalization. Peloton Interactive, Inc. (NASDAQ:PTON) delivered a -30.01% return since the beginning of the year, while its 12-month returns are down by -78.75%. The stock closed at $25.03 per share on April 13, 2022.
Here is what Merion Road Capital has to say about Peloton Interactive, Inc. (NASDAQ:PTON) in its Q1 2022 investor letter:
“Given what I have discussed so far you might be surprised that I built a new position in Peloton (“PTON”). PTON has had a rollercoaster ride in the public markets. Following their 2019 IPO at $29 the stock rocketed to over $160 at the peak of the covid hype, before tanking to its current price in the mid‐$20’s. The company has basically checked the box on any negative event you could think of. A few standouts include cutting guidance (May 2021, November 2021, January 2022), major strategic gaffes (overbuilding supply capacity, flip‐flopping on price cuts), and poor/misleading communication (raising capital 2 weeks after stating there was no need to raise capital). So why would I own this?
Peloton (the product, not the stock) has a strong brand name, value proposition, and customer loyalty. Despite their woes the company has built an established base of users that should be highly valued. The market is currently telling us that their 2.7mm users are worth $2,600 per subscriber, or just 7.5x subscription gross profit. Simplistically this assumes 1/7.5x = 13% annual attrition which is more draconian than current levels of ~10% (of course giving no credit for future growth)…” (Click here to see the full text)
Photo by CHU Gummies on Unsplash
Our calculations show that Peloton Interactive, Inc. (NASDAQ:PTON) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Peloton Interactive, Inc. (NASDAQ:PTON) was in 60 hedge fund portfolios at the end of the first quarter of 2022, compared to 62 funds in the previous quarter. Peloton Interactive, Inc. (NASDAQ:PTON) delivered a -27.43% return in the past 3 months.
In March 2022, we published an article that includes Peloton Interactive, Inc. (NASDAQ:PTON) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q1 page.
Disclosure: None. This article is originally published at Insider Monkey.
