Peloton Interactive (PTON) reported quarterly earnings after the close that significantly beat analysts’ expectations. Not only did EPS and revenues beat expectations but forward looking guidance was also above analysts’ preliminary expectations and paid digital subscription growth increased by over 200%. After being down -3.75% in today’s trading, the stock is up 10% in aftermarket trading on the news.
PTON short interest is $492 million; 5.40 million shares shorted; 2.74% of its float. Stock borrow fees are 0.30% fee or General Collateral, the cheapest borrow rate for the easiest to borrow stocks. PTON is the largest short in the domestic Leisure Products sector.
Peloton shares shorted have been declining since the end of February as stay-at-home stocks rallied during this Covid pandemic. Over the last month we have seen 1.74 million shares of net short covering, worth $158 million, a -24% decline. But over the last week we saw some short selling into the earnings report as some short sellers were betting on results that would not meet expectations Over the last week there was 390 thousand shares of net short selling in PTON, worth $36 million, an 8% increase in shares shorted.
Short sellers are down -$575 million in net-of-financing year-to-date mark-to-market losses, down -$82 million in just the first few days of September. Today shorts were up +$18 million in mark-to-market profits on its pre-market -3.75% stock price decline, but we are seeing the stock up +10% in after-market trading which would add -$46 million in mark-to-market losses to their losses if this stock price carries forward to tomorrow’s open. Most of this year’s short side trading can be characterized as a short squeeze with continued mark-to-market losses pushing out short sellers as they hit their loss limits. Today’s earnings results will do nothing to stop the squeeze, but rather the results and guidance will probably turn up the resistance knob and force out even more shorts. You can expect a rush of short sellers to join long shareholders in bidding up PTON’s stock price in the morning and driving its stock price even higher.
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