Peloton suffers from end of lockdown as market value slashed by $8bn

Shares in Peloton dropped by over a third on Friday, with the company expecting a major net loss for 2021

Peloton market value drops
(Image credit: Getty Images)

Shares in Peloton Interactive, Inc. fell by over a third on Friday, knocking $8 billion off the fitness company's market value. 

After enjoying considerable success at the start of the Covid-19 pandemic due to the closure of gyms, Peloton has since suffered from the easing of lockdown restrictions. 

With gyms reopening in key markets, such as the United States and United Kingdom, the once high demand for home-based fitness equipment has since declined quite dramatically. 

The company's full-year sales forecast was slashed from $5.4 billion to between $4.4 and $4.8 billion on Thursday night, causing shares to fall by 34 per cent. It is now expecting a net loss of $376 million for 2021, compared to $69 million profit a year earlier.

The New York City-based company has also suffered from fewer sign-ups to its subscription model, leading to a significant reduction in income that it was once receiving. The end of September represented Peloton's weakest subscriber growth for a three-month period in two years. 

Coupled with the fact that it isn't selling as many products, such as static bikes and treadmills, Peloton has had to take cost-saving measures across the business.

Chief Financial Officer Jill Woodworth told investors: "It is clear that we underestimated the reopening impact on our company and the overall industry.

“Some of the identified areas of savings include making significant adjustments to our hiring plans across the company, optimising marketing spend and limiting showroom development.”

Consequently, Peloton has stopped recruitment in all of their departments, and the company has also cut the price of its most popular entry-level bike by 20 per cent to encourage sales amid a declining market. 

Investment bank Credit Suisse told clients in an analyst note: “Demand is coming in lower on all fronts leading us to wonder when we might see a return on all the capital they have deployed.

“Long term, the connected fitness opportunity could still be intact but the path to get there appears more difficult."

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