Member-only story
Peloton Is Deflating Fast and Heading for A Crash
The once-heralded company is skidding off the track as the world returns to normal
Peloton was a pandemic winner. When the population was forced inside, those not content with walking around the block on loop turned to home workouts, and the company hit big. Sales surged over 250%, and in January 2021, the stock price hit an all-time high of $170 a share. It seemed the company had everything; aspirational branding, social appeal, high-quality equipment and the growth to match.
But the rest of 2021 has proved to be an uphill struggle.
The company had to deal with its first major crisis when its treadmill was linked to accidents and a user’s death. The ensuing recall cost Peloton over $165 million — and far more in damage to its reputation. As the year ticked on and the world returned to ‘normal,’ Peloton faced its next problem; a dramatic drop in sales and a churn rate that nearly tripled to 0.80. The problems were compounded with poor Q3 earnings that caused shares to drop 15%, and, in what seemed like an admission of defeat, the company lowered the prices of its bikes. Unfortunately, even the price drop has failed to halt the decline. Jill Woodworth, Peloton’s Chief Financial Officer, noted on a recent earnings call that while conversion rates were high, “overall traffic has not met our initial expectation.”
That wasn’t the only bad news delivered in the company’s quarterly earnings report, shared November 5th. Peloton reported a net loss of $376 million, a stark contrast from the net income of $69.3 million a year earlier. This resulted in a loss of $1.25 per share instead of the $1.07 analysts had predicted. Despite revenue being up 6%, it missed its target. Sales of fitness equipment dropped 17%. Worse, even the customers who own a Peloton product are using them less, with the average number of workouts per month dropping to 16.6, compared to 20.7 last year. In a final nail in the coffin, the company slashed its forecast for subscribers and sales for 2022, causing the stock price to plunge as much as 34% (its biggest ever drop), shedding $8 billion off its value. In short, the results — and Pelotons current situation — are bleak.
