The Peleton share price rose higher today as news came out that the fitness equipment maker was adding clothing apparel to the brand. The shares are up 8.5% and the stock looks positioned to continue upwards.
Peleton clothing line
The new clothing line (for men and women) will be priced at $15-$118 and will include hoodies, leggings and shorts.
This new range will also create a new revenue stream for Peleton. They will be looking to target the higher priced market and compete with companies such as Lululemon, who announced earnings yesterday, beating EPS expectations by 39%. Lululemon’s strong earnings are an indication that the high-end fitness apparel sector is in demand. Maybe Peleton will be able to capitalise on this, if they can compete with an already established name.
In May, following one death and 40 reported injuries, Peleton had to recall all treadmills. They initially challenged the warnings from the US Consumer Product Safety Commission, but lost the fight and their hands were forced. This sent the Peleton share price from $120 down to $80. Since then, the stock has slowly recovered. Revenues were lower, which was no surprise after the recall.
Road to recovery
The new addition to Peleton’s exposure will help them. Less reliance on one product or service, which we saw was detrimental when something went wrong. Also, the new revenue stream could mean they are able to lower the prices of the Peleton bikes, which could see boosted sales figures going forward.
After news today which saw good buying pressure come in, the stock looks set to make a move up, creating a higher low. $114 would be the first target, to fill the gap after the overnight drop following recent earnings. $127 is then the next resistance, a level that has been tested frequently but has never closed above since February. I think this new momentum will take the share price to these levels in the upcoming weeks.
A safe bet
I think the cautions of recalls and fear is in the past. Peleton is back delivering treadmills and branching out into new sectors. This growth potential is something to look forward to. The chart also looks set for a move. All these factors make it worthy of owning some shares in your portfolio along with Intuit and Upstart Holdings.