Peloton Faces Fines

Adding insult to injury, Peloton Interactive Inc. (NASDAQ: PTON), the decimated bike company, faces federal fines for what turned out to be dangerous treadmills that caused a number of injuries. The action comes at a time when a turnaround, started early this year, has faltered. Its stock once traded at just shy of $170 but now changes hands for about $9. That is a drop of 90%.
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The key to Peloton’s turnaround is to refresh its image as an elite provider of exercise equipment. Any reminder that its equipment was dangerous pulled that effort down. The company already has hurt its drive to improve its standing by selling used versions of its products for sharply discounted prices. It essentially has become the equivalent of a used car lot. As such, it undermines the sale of new models.
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In its most recently reported quarter, Peloton’s revenue fell 28% to $679 million. Its net loss was a staggering $1.2 billion. One has to wonder whether its move to sell used models will shave revenue further. On a per-unit basis, the price damage could be considerable. However, since Peloton owners have started to dump their bikes and treadmills online, Peloton at least has to get in on the action.
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In a struggle to produce sales, Peloton has even released an AI-driven program to help move products. It is hard to imagine the feature is a strong enough addition to improve demand.
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As 24/7 Wall St. has mentioned before, descriptions of the turnaround effort by CEO Barry McCarthy (who joined in February) have been undermined by the fact that the stock has continued to crater under his watch. He recently said this effort would vary by “where you sit.” There is no seat in the house from which people can see anything other than a dim future.