Peloton Interactive just posted a meaningful earnings beat — and the short sellers are responding, with a significant short-covering rally visible in the data over the past three weeks.
Short interest has dropped sharply from its early April peak. SI % FF hit 16.6% at end-March, climbed further to 16.4% in early April, then tumbled hard through late April after earnings came through on May 7. The print delivered a 9.4% next-day jump in the stock. As of this week, SI % FF has compressed to roughly 12.7% — a fall of nearly four percentage points from the April peak — with the stock now trading at $5.69, up 18% over the past month.
The borrow market confirms a relaxed setup. Cost to borrow has eased to just 0.39%, down 12% over the past week and well off the 0.57% levels seen in early April. Availability is generous — borrow supply is plentiful relative to what's actually lent out, which is a far cry from the tighter conditions of mid-April. The ORTEX short score of 56.2 is moderate and has barely moved over the past two weeks, consistent with a market that is covering rather than pressing new short bets. Options corroborate the calmer tone: the put/call ratio at 0.41 is only marginally above its 20-day average of 0.39, with a z-score under 0.7 — no material hedging signal.
The Street pivoted quickly after the earnings beat. Goldman Sachs raised its target from $7 to $8 on May 8, maintaining Buy, while Macquarie lifted from $6 to $7 the same day, also keeping Outperform. Both moves land with the stock at $5.69 — implying meaningful upside to consensus. The mean analyst target now stands at $7.97, roughly 40% above current levels. That said, Citi and JP Morgan cut targets sharply in February following the prior quarter's miss, moving to $5 and $6 respectively on Neutral ratings. The bull case centres on cost discipline, sustained free cash flow, and a 51.5% gross margin. The bear case focuses on declining revenue — top-line fell 6% year-on-year last quarter — and the fragility of a subscription-heavy model if membership churn accelerates. The EV/EBITDA multiple on a trailing basis is 13.2x, not cheap for a business still shrinking.
Institutional ownership adds a layer of interest. T. Rowe Price added more than 1.4 million shares in Q1, bringing its stake to 4.2% of the company. Eminence Capital and D.E. Shaw also added materially in the prior quarter, having built positions of around 4.2% and 4.0% respectively. That cluster of active-manager buying through Q4 2025 and into Q1 2026 provided a base for the stock even as short interest climbed to its peak. Insider activity has been the reverse — the COO trimmed twice in April following a stock award, and the CFO sold a small tranche in March — though the values involved are modest and the 90-day net insider position is marginally positive at roughly $4.2 million in value.
Earnings history sharpens the risk picture. The February 2026 print moved the stock down 21.7% the next day and 28.4% over five days — a severe reaction to that quarter's miss. The May 7 print reversed that dynamic, up 9.4%. The next earnings event is not scheduled until August 20, which gives the stock a relatively long run without a binary catalyst. The key question heading into that window is whether the current revenue decline stabilises or steepens — the Q3 print will be the first real test of whether the May recovery represents a turning point or a temporary relief bounce.
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