Peloton Is a ‘Prime Short Squeeze Candidate’ Amid Record Rally

(Bloomberg) -- Peloton Interactive Inc.’s run to record highs may not be coming to an end anytime soon as both long and short investors attempt to “pounce” on the limited amount of sell orders, according to financial analytics firm S3 Partners.

The at-home equipment maker’s more than 15% gain after impressive quarterly results has the stock on track for a record week that has boosted its market value by $3.4 billion. Thursday’s rally has resulted in more than $83 million in mark-to-market losses for short sellers, bringing their year-to-date decline to $243 million, S3 Partners data show.

“A continued Peloton rally and the associated mark-to-market losses will most certainly squeeze more short sellers out of their positions,” Ihor Dusaniwsky, a managing director at S3 Partners, wrote in a note.

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Going forward, it is important to see “if and when” bearish investors begin to get active again, said Dusaniwsky. “If the breakaway gets too far away from the pack and the stock is seen as being oversold, new short activity can put a brake on this rapid climb.” But for now, he sees Peloton as a “prime short squeeze candidate.”

According to S3, short interest in Peloton is valued at $582 million. More than 15 million shares are shorted, or 44.33% of its float.

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