Insights

Why Peloton Interactive Is Tumbling Today

What happened
Shares of Peloton Interactive (NASDAQ: PTON) were tumbling 7.4% at 11:03 a.m. EST on Wednesday, ahead of the connected fitness equipment maker’s fiscal 2022 third-quarter earnings report, scheduled to be issued tomorrow before the market opens.
The news is not likely to be any better than last quarter’s outing, which saw revenue growth fall to mid-single-digit gains while losses widened. Peloton previously slashed its outlook for the full year.
Image source: Peloton Interactive.

So what
Peloton has admitted it misjudged the impact a reopened economy would have on its business as consumers were able to return to gyms and fitness centers or even exercise outdoors once more. After initially embracing the image of a high-end equipment maker, Peloton is trying to distance itself from being seen as a luxury brand.
In addition to cutting the prices on its fitness equipment, Peloton has introduced a low-cost device that is essentially a smart camera a fitness enthusiast hooks up to their TV to do connected workouts. But it is feeling competitive pressure as rivals like Lululemon Athletica move into the market.
Now what
Analysts had pumped up the possibility Peloton could be a buyout candidate after its founder and CEO John Foley stepped aside and a new executive was installed. But the latter doused the rumor with cold water, saying he wouldn’t be wasting his time if a sale were happening, and the former still owns a controlling interest in Peloton’s voting shares, meaning he would have to agree to a sale if one were to occur.
Since he set himself up to be executive chairman of the company, a position which still has a day-to-day oversight role in the operations of the business, Foley still seems very much interested in running the business, even though he’s not CEO anymore.
With few positive developments to expect and plenty of downside risk apparent, investors seem to be getting out before things get worse.
Rich Duprey has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Lululemon Athletica and Peloton Interactive. The Motley Fool has a disclosure policy. –

What happened

Shares of Peloton Interactive (NASDAQ: PTON) were tumbling 7.4% at 11:03 a.m. EST on Wednesday, ahead of the connected fitness equipment maker’s fiscal 2022 third-quarter earnings report, scheduled to be issued tomorrow before the market opens.

The news is not likely to be any better than last quarter’s outing, which saw revenue growth fall to mid-single-digit gains while losses widened. Peloton previously slashed its outlook for the full year.

Image source: Peloton Interactive.

So what

Peloton has admitted it misjudged the impact a reopened economy would have on its business as consumers were able to return to gyms and fitness centers or even exercise outdoors once more. After initially embracing the image of a high-end equipment maker, Peloton is trying to distance itself from being seen as a luxury brand.

In addition to cutting the prices on its fitness equipment, Peloton has introduced a low-cost device that is essentially a smart camera a fitness enthusiast hooks up to their TV to do connected workouts. But it is feeling competitive pressure as rivals like Lululemon Athletica move into the market.

Now what

Analysts had pumped up the possibility Peloton could be a buyout candidate after its founder and CEO John Foley stepped aside and a new executive was installed. But the latter doused the rumor with cold water, saying he wouldn’t be wasting his time if a sale were happening, and the former still owns a controlling interest in Peloton’s voting shares, meaning he would have to agree to a sale if one were to occur.

Since he set himself up to be executive chairman of the company, a position which still has a day-to-day oversight role in the operations of the business, Foley still seems very much interested in running the business, even though he’s not CEO anymore.

With few positive developments to expect and plenty of downside risk apparent, investors seem to be getting out before things get worse.

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Lululemon Athletica and Peloton Interactive. The Motley Fool has a disclosure policy.

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