Peloton stock, once the darling of the pandemic, is tumbling after its latest earnings release. Its loss widened as the pace of revenue growth slowed dramatically and costs associated with a treadmill recall mounted. The shares fell as much as 15% to $97 following the release of its quarterly results and a worse-than-expected outlook for fiscal 2022.
Growth tapered off due to Peloton recalling both its Tread and Tread+ treadmill products in May, and temporarily halting sales of the machines. It is also facing stiffer competition from other at-home fitness businesses, such as Hydrow, Tonal and Lululemon-owned Mirror. Churn rate ticked up to 0.73% from 0.52% a year earlier, after hitting a 6-year low in the prior quarter.
Peloton slashed the price of its bike by 20% and announced a disappointing sales outlook number for Q2 of $800 million from $1 billion that analysts had estimated.
Even before Thursday’s slide, the shares were down 25% this year. Peloton had benefited from consumers exercising at home during the pandemic but as restrictions eased, the stock went in the opposite direction.
Short Squeez Takeaway: With competition rising, Peloton discounting the bike and upping marketing is a clear signal that the cost to acquire customers is going up after being pretty much the only player in the pandemic. Peloton is working on other products such as rowing machines and wearable gadgets and might need them to save the day because the bikes and treadmills are not cutting it at the moment.