On Thursday, September 26th, a monitor displays the signs for the initial public offering of Peloton Interactive Inc.
The company's shares closed down 23.9% at $24.22 on Thursday.
The sharp drop brought the stock below the $29 mark where it first priced at in September, and marked another notable milestone in the company's turbulent ride in recent months.
CNBC reported that the connected fitness company is temporarily stopping production of its products, and shares plummeted.
Two years ago, the company went public with an initial market cap of $8.1 billion.
The stock briefly fell below the threshold after its public debut. The broader market was tumbling around mid-March of 2020 as the uncertainty of the coronaviruses made it difficult for investors to make decisions.
The shares went on a massive rally as investors began to view Peloton as the ultimate stay-at- home stock. On January 14, last year, the stock hit an all-time high of $171.09, as the company reported triple-digit revenue growth and record-low levels of users leaving. At that point, it had a market cap of over $50 billion.
The investor concerns started to trickle in as the supply chain constraints were coupled with the massive growth of Peloton. Customers that had paid thousands of dollars for a bike or treadmill were reporting delivery delays, forcing Peloton to invest in capacity.
The news of a child dying from an accident associated with a treadmill machine spooked both investors and consumers. The company resisted calls to recall its machines. In May of last year, Peloton issued a voluntary recall of its Tread and Tread+ products. At this point, shares were trading below $100.
The pace of its revenue growth has slowed, and it isn't adding as many new users as it did a year ago. The demand for fitness products was extraordinary when the gyms were temporarily shut and people wanted to work out at home. Consumers have a lot of at- home fitness options to choose from. They can return to a gym or class.
After reporting three consecutive quarters of net income, the company recorded a loss in the three-month period ended March 31.
The company doesn't expect to be profitable until fiscal 2023.
According to CNBC, Peloton is working with McKinsey to look for opportunities to cut costs, which could include layoffs and store closings.
At the end of this month, it will add shipping and setup fees for its bike and tread products, in part because of historic inflation. The price of its bike will go from $1,495 to $1,745 The treadmill will cost $2,845 instead of $2,495. The bike will remain $2,495 according to the website.
In August of last year, the price of the bike was slashed by 20%, saying it hoped to give consumers a more affordable option.
In a note to clients, Andrew Boone of JMP Securities said that the upcoming price hikes could bring in as much as $150 million in revenue and gross profit. He said that it could encourage future customers to purchase the more expensive Bike+, which isn't being impacted by the price hikes.
The extra fees could cause consumers to shop elsewhere.
Product innovation and international expansion is what Peloton is banking on. It will soon start selling a strength product called Peloton Guide in a bundle with a heart-rate wristband. The hope is that existing users will become repeat customers when they purchase accessories.
The shares of Peloton dropped in 2021.
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