Peloton (NASDAQ:PTON) investors were in for a rude awakening on Thursday.
Many in the fitness community expected to see the connected fitness equipment maker report slowing sales. Gyms have reopened, and outdoor runs and vacations beckoned during the summer months. What investors hadn’t anticipated was a 20% price cut in the company’s top-selling product and a ramp up in marketing spending.
Growth is slowing, and it’s less profitable growth.
Roughly $2.9 billion of Peloton’s market capitalization was lopped off on Friday, the day after the pricing announcement was made and the company reported a wider-than-expected loss in its fiscal fourth quarter.
For most of 2020, the company rode a wave of homebound consumers willing to spend thousands of dollars to burn calories when gyms were shuttered due to the pandemic. Such heightened demand resulted in supply chain snafus, forcing Peloton to shell out more money to speed deliveries. Nonetheless, growth was coming much easier than it could have imagined. Peloton’s quarterly revenue ballooned to more than $1 billion for the first time, as the year came to a close.
Just two years ago, Peloton counted 511,000 connected fitness subscribers. Now, the company boasts 2.33 million. These are people who shell out $39 per month to access Peloton’s digital workout content, in addition to owning one of the company’s at-home fitness machines.
Its stock has gone along for the ride, too. Peloton was one of the biggest gainers on the NASDAQ 100 last year, with shares rallying 434% in 2020.
But so far this year, its share price has tumbled nearly 30%, closing Friday at $104.34, as investors stare down a new reality.
PTON shares dropped $1.95, or 1.9%, to $102.38
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