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After stock price collapse, Peloton faces tough questions about post-pandemic future

Shares of exercise equipment maker Peloton Interactive slumped on Jan. 20 following a report that it was temporarily pausing production. (Video: Reuters)
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It’s been a rough ride in recent years for Peloton.

The at-home fitness company soared after going public at $29 a share in late 2019 — and then the pandemic hit. Sales of Peloton’s stationary bikes and treadmills increased 172 percent during the early lockdowns. Millions of fans paid to stream its classes. Its stock price topped $160.

But Peloton has suffered a series of setbacks since then, including a nasty fight with safety regulators after a young boy was killed by one of its treadmills and doubts about whether Peloton — along with fellow pandemic darling, Netflix — can continue to grow as the pandemic fades.

The company was pummeled Thursday when its financial results failed to impress analysts and the company said it is considering laying off workers and reshaping its production. Its stock price tumbled to about $24 — below where it began two years ago. It closed Friday at just above $27.

Now Peloton and its chief executive John Foley face an uncertain future.

The company needs to contend with growing competition from reopening gyms and from companies such as Apple expanding into fitness tech. And there are questions about how Peloton has dealt with its growing roster of problems.

“They are starting to add up,” said Bernie McTernan, a senior analyst at Needham & Company. “I think something that people are wondering: Is this performance because of bad news or bad luck?”

The fate of Peloton has attracted additional attention because of its cultural significance. The brand is a lightning rod for people who sneer at the luxury equipment — prices start at $1,495 — and lampoon its exercise classes.

But Peloton also inspires a deep affinity, with a community of hundreds of Facebook groups and a popular Reddit forum. There’s a subgenre online of people describing how they were converted into Peloton fans.

Peloton fights federal safety recall after its treadmills left one child dead, others injured

Still, Peloton took a huge hit Thursday — its stock price dropping 24 percent — after a CNBC report citing internal documents said that the company planned to temporarily halt production of its signature bikes and treadmills because of slowing demand.

Foley slammed the report in a message posted on the firm’s website, calling it “incomplete, out of context, and not reflective of Peloton’s strategy.” But he also acknowledged that the company needed “to review our cost structure” and that layoffs were on the table as “options as part of our efforts to make our business more flexible.”

That same day, Peloton said its subscription revenue in the last three months of 2021 came in below its own expectations. It also reported a net loss of $372 million, compared with a loss of nearly $50 million at the same time last year.

Peloton did not respond to a request for comment Friday.

Peloton’s fortunes have been waning since the start of 2021 — compounded by a series of corporate missteps.

In April, Peloton aggressively fought federal safety regulators over whether to recall its $4,300 Tread+ treadmill.

The Consumer Product Safety Commission wanted Peloton to pull the product off the market after a 6-year-old boy was sucked under the treadmill and killed. The agency soon learned the treadmill was connected to at least 39 incidents involving children, objects and one pet being trapped under the machine.

The company shifted from attacking regulators to backing down once its resistance was publicized. It finally agreed to a recall.

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In December, Peloton got a public-relations black eye when the Mr. Big character died after riding a Peloton bike in a new episode of the Sex and the City series reboot. Peloton responded with an ad featuring the same character, alive and well, planning a Peloton ride. But that ad was pulled after the actor, Chris Noth, was accused of sexual assault.

Despite Peloton’s stumbles, the collapse of its stock price is not a signal that the company itself is likely to disappear, according to analysts.

While most analysts’ price targets for Peloton stock were slashed by half after the bad news Thursday, the expected prices were all still between $30 and $50.

“This is still a valuable business,” McTernan said.

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He pointed to the 2. 7 million subscribers, many of them paying $13 a month to access the online classes.

Peloton also reported Thursday a monthly churn rate among subscribers of less than 1 percent — a good sign for the company.

Peloton’s subscription model is what makes the company different from other firms such as the fitness watch maker Fitbit and the camera maker GoPro, which never recovered after initially high-flying debuts, McTernan said.

Peloton’s problem is that it needs to change.

“It’s seemingly not in the hyper-growth game,” he said, “then profitability is more important.”