Pair Trade: Short Peloton, Buy Nautilus: Much More Reasonably Valued For Recovery

Summary

• Peloton was a COVID-trade darling and has fallen greatly since the economy "re-opened". Nautilus has as well, but there is more value in Nautilus.
• Peloton expanded production of their pricey, connected exercise bicycles and treadmills as demand surged and also met with controversy and a very high valuation based on an unrealistic total addressable market.
• Rumors of a potential buyout also surfaced, but were potentially someone "talking their book." Nautilus is actually a much better buyout candidate.
• While the easy money to be made shorting Peloton has already happened, there are potential strategies to profit by being bearish, and also a long opportunity by buying Nautilus.

home gym room in the attic Nautilus Bowflex velocore

vicnt/iStock via Getty Images

For the "Long/Short Pair Trade" contest, I'd like to offer for your reading pleasure two stocks that benefitted from the COVID trade, then suffered during the re-opening: Nautilus (

Analyst’s Disclosure:I/we have a beneficial long position in the shares of NLS either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I established my long position in Nautilus by selling cash secured puts instead of buying the shares outright, and I have sold out of the money bear call spreads on Peloton to gather premium in the past. I may repeat both strategies this month or in the future. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor or tax professional about your specific financial situation before implementing any strategy discussed herein. The stock or call strategies discussed are mine actions taken as a private investor and are not meant to be recommendations for any other investor or trader.