Shares of Interactive Platoon (PTON -4.93%) continue their long and steady slide this week, appearing to close 8.4% from last Friday, according to data from S&P Global Market Intelligence.
The connected fitness equipment maker’s stock rose more than 2% at 11:47 a.m. ET today, but that’s nowhere near enough to wipe out the deficit for the rest of the week.
Trying to shed its luxury brand image (although fitness equipment starting at $1,200 tends to imprint the image in consumers’ brains that it’s not a necessity), Peloton has reduced the price and introduces lower cost options.
Its new $300 Guide, a fancy smart camera that hooks up to a TV, might not clear that picture either, as there are other products on the market that are cheaper and more fully featured. Coupled with soaring inflation and falling real disposable income, even these low-priced items can still seem overpriced.
Peloton continues to grow, but much more slowly than investors were used to, and now its connected fitness classes face more competition. Lululemon Athletica (LULU -2.15%) will initiate connected workouts through their Mirror device. While there are doubts about the effectiveness of launching a similar product in what is becoming a crowded market, having another rival makes Peloton’s already subdued outlook even riskier.
Peloton isn’t expected to become profitable on an adjusted basis until 2023, but if the economy slows further (or worse, declines), hitting that threshold could be delayed. And it is possible that we are in the early stages of a recession.
First-quarter gross domestic product fell 1.4% from an expected 1% rise, while the consumer price index continues to soar, hitting 8.5% in March. We’ve been dealing with inflation that’s not been seen in four decades, and Treasury Secretary Janet Yellen says it’s just something we’re going to have to live with for a little longer.
St. Louis Federal Reserve Chairman James Bullard said the Fed may need to get even more aggressive with interest rates than expected, and endorsed the tough tactics undertaken by Fed Chairman Paul Volcker , in the 1980s when he raised rates to 20%. Bullard says stopping economic growth may be necessary to get inflation under control.
This is not an environment conducive to selling $1,200 exercise bikes or $2,400 treadmills, and while Peloton has lost 85% of its value, we may not yet have hit the bottom.