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After 400% rally off March lows, Peloton could be headed even higher into earnings

Peloton is moving higher into earnings.

The stock is up 13% this week, adding to a more than 400% rally since the March lows, ahead of the fitness equipment maker’s earnings on Thursday afternoon.

Cowen and Goldman Sachs grew even more bullish on Peloton on Wednesday, tying for a new Street high price target of $110. Both firms cited increased demand in the exercise company’s products during the pandemic and expectations for higher growth off newer and cheaper models.

Danielle Shay, director of options at Simpler Trading, expects the stock to keep going higher even after the earnings report.

“Peloton is the leader in the space, and one of the main issues that people have had with Peloton is the price point. Well, you can pay per month. They also have some lower-priced products now, and we have … evidence that people are still continuing to cancel their gym membership,” Shay told CNBC’s “Trading Nation” on Wednesday.

Shay added that the large number of investors betting against the stock could actually working in its favor.

“Because of the high short interest it has a potential to continue trading higher, and especially going into the earnings report,” she said. “If we get a new all-time highs [Thursday], then we should see some short covering.”

Peloton has short interest at 3% of its float. A short-covering rally occurs when a stock rises and investors shorting the name are compelled to cover their positions, which then triggers another surge higher.

Ari Wald, head of technical analysis at Oppenheimer, also sees the stock heading higher based on its strength during the latest market-wide dip.  

“There there was a lot of interest to buy that stock on the pullback. And I think for us it really just comes down to simple trend following. As long as the stock is above $72 support, which is its recent low point, our expectation is that the trend is higher and new highs are expected,” Wald said during the same “Trading Nation” segment.

Peloton closed on Wednesday at $91.17 a share.

The company is expected to post a profit of 10 cents a share for its fourth quarter ended June, according to analysts surveyed by FactSet. That is up from a loss of 14 cents a share a year earlier. Sales are anticipated to have grown by 162%.

Disclosure: Shay owns shares of Peloton; CNBC parent Comcast-NBCUniversal is also an investor.


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