What’s going on with the Peloton share price?

The Peloton share price collapsed following its latest earnings report and has been in a slump all year. Can Peloton get back to winning ways?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Stack of British pound coins falling on list of share prices

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The pandemic undoubtedly lit a fire under the Peloton (NASDAQ:PTON) share price in 2020. After a brief wobble in March last year, Peloton stock shot up by 750%. That ride took the share price from $20 to an all-time high of $170 in January 2021.

Investors seemed happy bidding the Peloton share price higher and higher. They must have believed Peloton bikes would fly off the shelves as gyms closed. There was also a belief that people would stick to working out at home even as gyms reopened.

The Peloton bike is a premium piece of kit. Once bought for nearly $2,000 with a few extras and put in a prominent place like the marketing encourages, a user might feel committed to getting the most out of it. For a rolling subscription, users get a dense schedule of workout sessions to join whenever they want. Workouts and progression are also ‘gamified’ with leaderboards, medals, and achievements, and the chance to compete against other subscribers. Instructors will also call out riders’ names to encourage them after hitting significant milestones, which is motivational and might prompt a user to fight to hit the next one. This all sounds good in principle for Peloton, but did it deliver?

Are the wheels coming off?

For the 2021 financial year, which ended 30 June, Peloton took $4.02bn in revenue, soundly beating the prior year’s $1.83bn. Peloton bikes did fly off the shelves during the pandemic. But the Peloton share price has collapsed since that all-time high in January 2021.

The last quarter of the fiscal year 2021 showed a drop in revenue. Peloton reported operating and net losses in the last two quarters of 2021. Previously Peloton had been profitable. Investors might have taken this as a sign that Peloton was not entirely convincing people that paying over $1,000 for a home exercise bike and an ongoing subscription was worth it as gyms reopened.

Let’s face it, without the subscription for classes and functionality, the ‘just a bike with an iPad’ moniker does ring true for Peloton. And what was the actual market size for Peloton, given the high price point for entry and the ongoing subscription to unlock its full features? These types of questions likely fed the malaise of investors and helped drag the Peleton share price as low as $81 in October 2021.

There was a further shock for Peloton investors when the first quarter of 2022 results missed analyst targets, and management cut full-year guidance sharply. Since their release on 5 November, the Peloton share price has slumped to around $50, giving up much of last year’s gains.

What next for the Peloton share price?

Investors have underestimated the impact of reopening after the pandemic on Peleton. The size of the core bike market was probably overestimated, and it may, in fact, already be saturated.

Peloton is making moves to address these issues. The cheaper Peloton Guide, which connects to televisions, is being released. The Peloton Tread running machine is starting to sell. People are signing up for the app alone, which gets them a lot of classes for a reasonable price. But analysts are slashing price targets for Peloton and there’s now the lure of getting out of the house to exercise with others in person. I think the Peloton share price will struggle unless it shows that demand can persist in a post-pandemic world. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

James J. McCombie does not own shares in Peloton Interactive. The Motley Fool UK has recommended Peloton Interactive. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Dividend Shares

Here’s my 2024/25 dividend forecast for National Grid shares after their recent 17% plunge

National Grid shares could still be a good choice for income, even after the recent seven-for-24 rights issue, says Edward…

Read more »

photo of Union Jack flags bunting in local street party
Top Stocks

5 quality UK stocks to consider buying for the new ‘British ISA’

In theory, a British ISA would allow investors an additional £5k (on top of the standard £20k allowance) so long…

Read more »

A mixed ethnicity couple shopping for food in a supermarket
Investing Articles

4.24% yield and a P/E of just 12.1! Tesco shares look like a no-brainer buy for me

Harvey Jones thinks Tesco shares look good value after today's solid first-quarter results. He's now saving up to buy the…

Read more »

Market Movers

Why the Raspberry Pi share price is on everyone’s minds right now

Jon Smith reviews the 14% jump in the Raspberry Pi share price today as part of the successful IPO of…

Read more »

Rainbow foil balloon of the number two on pink background
Investing For Beginners

2 UK stocks that could do well out of the general election

Jon Smith runs the rule over two UK stocks that may benefit from higher spending on healthcare, consumer staples and…

Read more »

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

Could this undervalued growth stock be the next big success story in US tech?

Shares of this US technology giant have collapsed almost 50% in 2024, but is the growth stock now an incredibly…

Read more »

Young black woman using a mobile phone in a transport facility
Investing Articles

After soaring 35% this year, is there still value in Barclays shares? Here’s what the charts say!

Barclays has been on a tear in 2024. But where does that leave investors considering buying some shares now? This…

Read more »

Light trails from traffic moving down The Mound in central Edinburgh, Scotland during December
Investing Articles

Nvidia stock has surged 3,450%. This UK investment trust owns loads!

Nvidia's recent amazing price surge has helped boost the value of this investment trust too as the chipmaker is its…

Read more »