Peloton Stock Falls 24% On Reports It Plans To Stop Bike, Treadmill Production

Shares of Peloton (PTON) fell 24% at $24.22 U.S. on media reports that the connected fitness company is temporarily halting production of its exercise bikes and treadmills.

The sharp drop in Peloton stock wiped $2.5 billion U.S. off its market value and pushed the price below its $29 U.S. initial public offering (IPO) mark.

After the market closed, Peloton issued a news release that said its fiscal second-quarter revenue would be within its previously forecasted range.

However, the company said that the quarter ended December 31 would add fewer connected fitness subscribers than it had been projecting. Peloton shares bounced off their lows in extended trading after the company’s news release.

Peloton went public in 2019 with an initial market capitalization of $8.1 billion U.S. The stock briefly traded below the $29 U.S. threshold following its public debut. Around mid-March of 2020, near the onset of the pandemic, Peloton shares were hovering around $23 U.S. as the broader market was tumbling amid the uncertainty of the pandemic.

But as investors began to view Peloton as the ultimate stay-at-home stock, shares went on a massive rally. The stock hit an all-time high of $171.09 U.S. on January 14 of last year, as Peloton was reporting triple-digit revenue growth. At that point, the stock had a market capitalization of $50 billion U.S.

But after rising more then 440% in 2020, Peloton shares dropped 76% in 2021.

Investor concerns mounted as Peloton’s massive growth was coupled with supply chain constraints. Customers that had shelled out thousands of dollars for an exercise bike or one of Peloton’s treadmills were reporting delivery delays, and Peloton was forced to invest in order to beef up its manufacturing capacity.

Then, news of a child dying from an accident associated with Peloton’s pricier Tread+ treadmill machine last March spooked both investors and consumers. At first, Peloton resisted calls for the company to recall its treadmill machines. As additional injuries were reported, though, Peloton issued a voluntary recall of its treadmill products last May.

In recent months, Peloton has seen the pace of its revenue growth slow, and it isn’t adding as many new users per quarter as it was a year earlier.

Consumers now have numerous at-home fitness options to choose from. They can also now go back to a public gym or private fitness club in most jurisdictions.

Peloton has said it doesn’t expect to be profitable until 2023. Media reports earlier this week said Peloton is now working with consulting firm McKinsey & Co. to look for opportunities to cut costs, which could include layoffs and store closures.