Last week, Peloton (NASDAQ:PTON) posted devastatingly weak results and lowered its revenue guidance. The company announced a hiring freeze and set an all-hands employee meeting. What happened?
Investors may speculate that Peloton met with staff to discuss ways to cut costs and slow the growing losses ahead. Without a strong outlook, gross profit margin declines will hurt its prospects. For the full year, Peloton expects revenue of $4.4 billion to $4.8 billion. It previously expected revenue of $5.4 billion.
Peloton stocks should not have traded as high as they did. At the time, the pandemic drove demand to unsustainable levels. When drug companies produced a viable vaccine that would slow infection rates and decrease hospitalizations, the lockdown lifted. People need not buy an expensive stationary bike and an ongoing subscription fee to exercise.
At its height, PTON stock traded at a market capitalization of over $40 billion. At a stock price of around $56, momentum investors will bail. They will look for the next fad and trade those stocks instead.
Investors could not predict when the dramatic reversal in demand for a $2,000 stationary bike and monthly fitness class fees would happen.
The current slowdown is just a start. Look out for subscription rates to fall and new customer acquisitions to slow.
