Peloton's controversial holiday ad costs investors

Three days of selling has erased $1.6 billion of market value

Peloton shares have slumped 12.4 percent since the home-exercise company released its “sexist” commercial, leaving them on track for the second-worst weekly performance in their history.

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The three-day selloff has erased $1.6 billion of market value, dropping Peloton’s market capitalization to $8.7 billion. Peloton went public on Sept. 26 at a valuation of $7.2 billion.

TickerSecurityLastChangeChange %
PTONPELOTON INTERACTIVE31.70+0.87+2.82%

The backlash to the ad is “worth monitoring,” but unlikely to impact holiday sales, Raymond James analyst Justin Patterson wrote in a Dec. 3 note to clients.

Patterson, who has an "outperform" rating on the shares, wrote that Peloton has been a meme, or image that went viral on the internet, in the past, but sales were not impacted.

Peloton drew the wrath of the social media world Tuesday after its holiday commercial, which depicts a woman who's surprised with a Peloton bike for Christmas and documents her workouts over the course of the year, was deemed “sexist” by some viewers because of how she looks at her husband for approval.

Reaction to the spot, which has received nearly 3.5 million views on YouTube, has been overwhelmingly negative, registering more than 14,000 thumbs-down and only 6,300 thumbs-up.

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"While we're disappointed in how some have misinterpreted this commercial, we are encouraged by – and grateful for – the outpouring of support we've received from those who understand what we were trying to communicate," a Peloton spokesperson told FOX Business in a statement.

While the selloff in Peloton shares has coincided with the backlash from the commercial, profit-taking is more likely the reason for the slide.

Shares had rallied 62 percent from Peloton’s first-quarter earnings report on Nov. 5 through Monday. The report showed the company’s quarterly loss narrowed to $49.8 million, a $4.8 million improvement from the prior year.

Wall Street is overwhelmingly bullish on Peloton, despite the company not expecting to turn a profit until 2023.

Of the 20 analysts surveyed by Refinitiv on Nov. 29, seven rated the company a “strong buy” and 12 said it was a “moderate buy.” One analyst had a “hold” rating. Their average 12-month price target was $31.79 a share.

JMP Securities analyst Ronald Josey reiterated his “market outperform” rating on Wednesday and raised his price target to $38 from $34 due to “greater confidence on subscription revenue and newer product launches along with growing user engagement.”

Peloton lowered the price of its digital subscription to $12.99 per month on Tuesday from $19.49, which he believes will “accelerate adoption of its fitness platform.”

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Peloton shares have climbed 14.9 percent since debuting on the Nasdaq.