Is it too soon to say that 2022 is not Peloton’s year?

Yesterday, Peloton announced that it was pausing production on its bikes and treadmills as a cost control measure in the face of waning demand. When I wrote about Peloton’s uncertain future in November, I had no idea that the company was about to go on a tumultuous ride.

The luxury fitness brand entered the new year battling high-profile PR problems. It all started with the pilot of the long-awaited Sex And The City revival, where Mr. Big suffered a fatal heart attack moments after getting off of his Peloton. This created quite a buzz.

To Peloton’s credit, the company quickly got back on track with a clever ad starring Chris Noth, the actor behind Big, very much alive and thriving. Unfortunately, a few days later Noth was accused by multiple women of sexual assualt. And just like that, Peloton pulled its ad and was left at the center of another media storm.

That turned out to be the least of the company’s troubles.

After weaker than anticipated holiday sales, analysts have lowered their forecasts for 2022–with revenue estimates now projected at $4.2 billion, a decrease of $400 million. The company’s stock is down more than 80% from its highs last year, hitting a 52-week low of $29.11 this past Tuesday. According to SEC filings, Peloton insiders, including the president and CEO/co-founder, sold nearly $500 million in stock before the company’s big drop–leaving many with questions.

And while cutting costs is a bandaid, Peloton’s best solution to many of these issues is, unfortunately, also its biggest challenge: attracting new subscribers. As I mentioned in my previous blog, the at-home (luxury) fitness market has become crowded, with dozens of brands emerging during the pandemic–many offering equipment and subscriptions that are more affordable and/or versatile than Peloton’s.

However, Peloton in its current state may have merely maxed out its target audience. The subscriber rate has increased more than 100% year-over-year for the last two years. And, PR problems aside, Peloton has become synonymous with at-home stationary bikes–so it’s not a matter of increasing brand awareness.

In order for Peloton to attract new customers, it’s going to have to make some changes–whether that’s on price, diversifying its equipment offerings, or something else entirely. Otherwise, the company better strap in for a tough road ahead.

Danilo Diazgranados is an independent investor in the global food and wine, financial services, real estate, and the hospitality sectors.

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