Peloton founder and CEO John Foley rides a Peloton bike at his home in New York, USA. / Courtesy of the Wall Street Journal
It has been reported that Peloton, a company specializing in indoor exercise equipment and services, has temporarily halted production of bicycles. Peloton is a business that sells indoor exercise bikes and other exercise programs to customers during the COVID-19 period. However, as concerns over growth have grown this year, the stock has plunged more than 80% in the past year.
According to CNBC on the 20th (local time), Peloton has temporarily halted production of connected fitness products to respond to declining consumer demand and cut costs. Peloton plans to stop production of bikes for two months from February to March. In December of last year, it stopped producing the expensive product ‘Bike+’.
‘Tread+’ machines are also not expected to be produced. Peloton previously stopped producing Tread+ after a recall last year. Peloton said in a private presentation on the 10th that “the demand for its connected fitness equipment has entered a phase of ‘significant decline’ worldwide due to the price sensitivity of shoppers and the activity of competitors.”
Markets point out that the Peloton made a fundamentally wrong guess about ‘how many people will buy their products’ after the high demand during the COVID-19 pandemic. “Thousands of bicycles and treadmills are currently lying in warehouses or cargo ships,” CNBC said.
Before the launch of the $495 strength training product ‘Peloton Guide’, codenamed ‘Project Tiger’, Peloton understood that customers’ interest was not as great as expected. The company self-assessed this as “a signal of a more challenging post-COVID-19 demand environment.” The official US release of Guide has been delayed from October last year to April.
Shares of Peloton fell 23.93% to close at $24.22 on the day of the halting of production.
Peloton’s share price has fallen 84.68% in the past year. Its market capitalization peaked at $50 billion in January last year. The current market cap has shrunk to the level of $10.4 billion.
According to market research firm TipRanks, the average target price of securities companies for Peloton is $66.48. However, out of 27 securities companies that have offered a target price for the past three months, 15 of the brokerages gave a ‘hold’, 2 ‘sell’ opinions, and only 10 ‘buy’ opinions.
Silicon Valley = Correspondent Hwang Jung-soo
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