By Kuldip K. Ambastha
Peloton Interactive, Inc. (PTON) is a luxury exercise gear maker which was in the news prominently during this past trading week. The company was also mentioned on this website once before (What Caught Our Attention in the Investment World? – Week of December 23-27, 2019).
On Wednesday, May 5, 2021, the company’s stock saw a -14.6% loss for the day. After safety concerns were discovered, Peloton had to recall its Tread and Tread+ treadmill machines. Despite the safety issues, Peloton still has an extremely loyal base of customers. Peloton management views the safety recall as only impacting the stock’s performance over the short-term, and not over the long-term. The recall will likely cost about $165 million in lost revenues.
Initially, Peloton management had denied safety warnings communicated to the company by regulators, but then later on apologized for what happened in terms of software and hardware issues as part of announcing the safety recall on Wednesday. Stationary bikes form most of the company’s revenue presently. Treadmills only compose a small percentage of the company’s revenue at this time, but are seen as a potentially large part of future revenues. Aside from the recall, Peloton has struggled with expanding supply to meet customer demand for several months. Peloton management has said it is firmly committed to changing its practices in order to improve going forward.
If customers stay loyal and problems are fixed, Peloton may improve its stock’s performance in the future.
Keywords – Peloton Interactive, Inc., Peloton Interactive, Peloton, PTON, luxury, exercise, gear, fitness, health & wellness, products, services, Tread, Tread+, treadmill, stationary bike, safety, recall, regulation, customer loyalty, software, hardware, revenues, supply, demand, short-term, medium-term, long-term, past, present, future.
Disclosure – The principals and clients of Ambastha Financial LLC have no positions in PTON.
Disclaimer – No recommendations are being made via this post. Past performance is not an indicator of future performance. As an investor, you should do your own research and seek professional advice from a Registered Investment Adviser (RIA). You can lose money by investing in stocks and other instruments. Ambastha Financial LLC does not assume any responsibility (legal or otherwise) for any losses that may occur as a result of actions taken based on this post. All content copyrighted © 2021 – Ambastha Financial LLC.