Left's Citron Research warned that the Peloton's bikes, priced at over $2,200, and its streaming exercise video service face competition from aggressive, cheaper rivals. It predicted Peloton's stock would fall to $5. The stock dropped $2.32 to $32.45 following the report.
Peloton did not immediately respond to a request for comment about the Citron Research report.
Peloton, which went public in September at $29 a share and is losing money, has filed lawsuits against Echelon Fitness LLC, alleging it infringed its patents and sold “cheap, copycat” products. New York-based Peloton has also filed a lawsuit against Flywheel Sports Inc, which sells its own stationary bikes with built-in tablets.
Left is one of Wall Street's most prominent short sellers, and his reports in the past have hurt shares of companies including Twitter, GoPro, Wayfair and ecommerce website Jumia Technologies.
"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," Citron Research said in its report.
But Oppenheimer analyst Jason Helfstein, who recommends investors buy Peloton's stock, raised his price target to $38 from $29 on Tuesday, saying the company is likely to grow faster than its rivals and pointing to strong website traffic and improving customer satisfaction.
On the company's quarterly earnings conference call on Nov. 5, Chief Executive CEO John Paul Foley, in response to an analyst's question about competition, said: "We have a seven-year head start. We created the category. I would say, at this point, we do not have what I call like-minded competition, which would be a very well-capitalized technology company. To our knowledge, that company doesn't exist yet, but it may at some point in the coming years."
About 20 analysts cover Peloton, on average rating it "buy."
Citron Research said its $5 target price is based on a comparison with other subscription-based companies' market capitalizations per subscriber.
With Tuesday's decline, Peloton is down 12% from a week ago, when faced criticism for a Christmas ad some labeled as "sexist," and before it cut subscription prices for its video streaming service.
The stock remains up 12% from its IPO in September.
By Noel Randewich