Peloton inventory has a market cap of $ Four billion as a result of recall of treadmills
Maggie Lu uses a peloton treadmill during CES 2018 at the Las Vegas Convention Center on January 11, 2018 in Las Vegas, Nevada.
Ethan Miller | Getty Images
Peloton stock closed nearly 15% on Wednesday, shedding $ 4.1 billion in market value in one day after the fitness equipment maker apologized for not voluntarily recalling its two treadmill machines over safety concerns.
As of March 18, Peloton’s market cap has lost $ 7.4 billion. That day, Peloton CEO John Foley announced that a child was killed in an accident involving a Peloton treadmill. The company has since held discussions with the U.S. Consumer Product Safety Commission about dozen of reported injuries on its machines.
Peloton’s stock was a big winner in 2020. Shares rose more than 400% over the course of the year. Peloton’s market value peaked at $ 49 billion in mid-January. Investors rebounded behind Peloton as it saw tremendous growth in the early days of the Covid pandemic.
Consumers were looking for ways to exercise at home while the gyms were closed, and Peloton quickly became the choice for those who could afford its high-end bikes and treadmills. Peloton’s revenue in 2020 increased from $ 915 million a year ago to $ 1.8 billion.
But 2021 was a different story. The stock is down 45% so far this year. Part of the decline is due to investors no longer preferring companies that stay at home from trends. Stocks like Zoom and Netflix have also started to fade away. However, peloton’s decline is deeper due to the treadmill debacle.
On Wednesday, Peloton shares hit an intraday low that has not been hit since September. The stock closed the day at $ 82.62.
“We see this as another sign that Peloton’s voice and platform have grown faster than its business, and it is still working to grow to its fame,” said Simeon Siegel, an analyst at BMO Capital Markets, in a press release the customer. “With market capitalization still ~ $ 30 billion … Peloton’s market value is way above expected results.”
“We believe it can be argued that Peloton’s market value was created more by its marketing department than by its engineers or instructors,” Siegel said.
Siegel has an underperform rating on Peloton stock with a price target of $ 45.
Overall, however, Wall Street analysts are having a hard time building consensus on which direction stocks will go next. Indeed, some see the slump as an opportunity to buy.
“In the years to come, we will remember this moment in Peloton’s history as a proverbial buying opportunity,” said Scott Devitt of Stifel.
Peloton said Wednesday it should have acted faster to resolve the treadmill issue. It is said that a repair is in progress and will be offered to treadmill owners in the coming weeks. It had been working on bringing its cheaper treadmill model to market in the U.S. later that year, but it’s unclear whether the company will push those plans forward.
“I want to make it clear that Peloton made a mistake in our first response to the Consumer Product Safety Commission’s request to recall the Tread +,” said Foley. “We should have been more productive with them from the start. I apologize for that.”
Peloton will report quarterly results after the market closes on Thursday.
Read the full statement from the CPSC here.
– CNBC’s Christopher Hayes contributed to this coverage.