Peloton, an interactive fitness platform in the United States, is known as the "Apple" in the field of fitness, but now it has encountered a stock price storm.
At the close of U.S. stocks on January 20, Peloton reported $24.22 per share, plunging 23.9 percent, and its market value evaporated by about $2.5 billion.
According to CNBC, Peloton internally released documents saying it would suspend production of bicycles and treadmills. On Thursday, Peloton CEO John Foley responded by calling it false information. As soon as the news came out, Peloton rose 7.76% before market hours at $26.10 per share.
7 years to become a unicorn
With people's awareness of health more and more attention, fitness has become a pursuit of contemporary urban youth. According to the Global Health and Fitness Club (Gym) Market: The Potential Impact and Forecast of covid-19 (2020-2024), the global health and fitness club market will reach $96.6 billion by 2024.
And Peloton is the company that was born under this outlet.
In 2011, john Foley found out at the gym that a spinning class could only accommodate 20-30 people, and he had a whim: "What if a class could involve thousands of people?" ”
The idea was this, but at this time John was over 40 years old, and although he had a love for fitness, it was not a good choice for a "head of family" to give up his existing high-paying position because of an idea.
Fortunately, his wife, who also loves fitness, has given John enough support, and John has raised more than $200,000 from friends and family, and founded Peloton with friends and former colleagues.
In 2012, Peloton started with intelligent spinning, and unlike other fitness platforms, Peloton focuses on the business model of combining online content + offline fitness, which further improves its development projects in the field of Internet fitness.
After Peloton's first round of institutional funding was led by the Tiger Global Fund in New York in 2014, Pelton expanded into treadmills, yoga and meditation.
In order to attract more users, Peloton invited many famous "net red coaches", users can watch live coaches online while cycling or running at home; and established their own retail experience store network, realizing the "vertical integration" of product and service production and delivery.
In November 2019, Peloton was officially listed on the Nasdaq Stock Exchange in New York, and its initial share price was $20.
However, Peloton suffered a break on the first day of listing, the day's closing decline of more than 11%, after the release of the second quarter of 2020 earnings, although the revenue exceeded expectations, but the company's stock price still fell more than 12% in after-hours trading.
For a long time, Peloton was not optimistic about the capital market and investors, until March 2020, when the new crown epidemic broke out in the United States, its stock price rose from the lowest point of $17.7 / share to the highest point of $171.09 / share, nearly 10 times.
Watch the building collapse
Just when Peloton seems to have taken the top spot in the world of smart home fitness brands. In March 2021, an unexpected incident put Peloton on the cusp.
Peloton's Tread+ treadmill killed an 8-year-old child due to an overly high treadmill and excessive gap between the running belt and the ground. Subsequently, the U.S. Consumer Product Safety Commission (CPSC) issued a statement on April 17 saying that the treadmill has the risk of serious abrasions, fractures and death to children, and that child consumers should stop using the product immediately.
As soon as the news came out, Peloton shares fell nearly 15% in pre-hours trading.
In the face of emergencies, Peloton executives did not know how to respond, and they missed the best time to remedy. Until May 7, Peloton announced the recall of 12.5 treadmills around the world, at this point, Peloton fell from the "altar" and the stock price began to fall off a cliff.
The sudden outbreak of the epidemic allowed Peloton to obtain a ticket to the "altar", but it also made it too happy, forgetting that the original intention of the brand should be to focus more on polishing products to make innovations rather than producing and selling goods, ignoring product safety hazards.
Production? downsizing?
Peloton's revenue growth slowed after the treadmill incident, and the number of new users added in the quarter was less than expected.
CNBC reported on Jan. 10, citing peloton internal documents, that the company would suspend bike production in February and March and suspend production of its flagship product, the spinning bike, until June.
According to the Wall Street Journal, John Foley responded in a letter to employees: "This news is taken out of context and does not reflect Peloton's strategy, and the company has identified the leaker and is taking appropriate legal action." ”
At the same time, John Foley said in the letter: "We will adjust the company's production scale to improve our profitability prospects and optimize costs across the company." ”
According to CNBC, Peloton is currently working with consulting firm McKinsey & Company to find opportunities to cut costs, which could include layoffs and store closures. Peloton also acknowledged on Thursday that the company is assessing the size of its workforce and will consider whether layoffs are needed.
Peloton blamed the losses on inflation and supply chains. And announced that starting January 31 this year, the price of the bike Bike will rise from $1495 to $1745, the price of the treadmill Trade will rise from $2495 to $2845, and consumers will have to pay $250 and $350 for delivery and installation of spinning bikes and treadmills, respectively, and any previous purchase of this service is included.
And in August last year, Peloton just cut the price of its spinning bike from $1,745 to $1,495, saying it wanted to offer consumers a more affordable option.
According to CNBC, JPMorgan analyst Andrew Boone said in a report to customers that the price increase of Peloton products could bring up to $150 million in revenue and gross profit in fiscal 2023. He said it could also encourage future customers to buy Peloton's more expensive Bike+, which, while priced at $2495, has not been affected by the price increase and could be seen as a more reasonable option.
Peloton is looking to product innovation and international expansion to help drive future growth, and says it will soon begin selling a strength product called peloton Guide, which is bundled with its heart rate-measuring arm strap for $495. The company believes that when existing users buy accessories such as Peloton's dumbbells, spinning shoes and clothing, they become repeat customers.
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