Peloton: The ESSENTIALS
The latest disclosures of cost-cutting measures by Peloton Interactive (NASDAQ:PTON) indicate the firm is taking defensive stances.
Expensive exercise equipment may be one of the first things people stop purchasing if a recession takes hold.
Despite the (NASDAQ:PTON) stock price’s recent rise, there is still too much danger and not enough return.
What’s the Story?
The stock price of workout equipment manufacturer Peloton Interactive (NASDAQ:PTON) is down 2% on Monday after recovering from an early drop of over 6%. The decline came after a substantial rise on Friday when the news of price hikes and expense reductions was announced.
What is the Reason?
Just as when you get home and realize you made a wrong purchase, this is a case of buyer’s remorse, except this time, the market is dragging its feet. Discretionary companies like Peloton Interactive (NASDAQ:PTON) remain vulnerable after investors had the weekend to mull over Friday’s data and renewed fears that a recession remains a serious possibility.
The price of the Peloton Bike+ and the Peloton Tread treadmill was raised on Friday in numerous major cities. Consider that in the United States, the Bike+ will go up in price from $1,995 to $2,495, while the Tread will go up from $2,395 to $3,495. July decided to completely outsource manufacturing of its workout equipment to third-party manufacturers in an attempt to save expenses, leading to the price rise. That announcement was followed by a reversal of the stock’s downward trend that eventually unraveled more than 90% of the high value set in early 2021, amid the worst COVID-19 outbreak.
Separately, on Friday, Reuters claimed that a business message hinted at impending layoffs. Approximately 800 employees and the potential closure of some of Peloton’s 86 retail locations are at risk.
Investors were ecstatic at the news, as they expect it to set the firm back on the road to profitability, something it last did in late 2020 when people stranded at home bought workout equipment in droves.
Where Do We Go From Here
After last Friday’s 13.6% bullish surge, today’s dip may be explained away as traders collecting some profits. Not only are investors less optimistic than they were only a week ago, but the market isn’t as buoyant as it was. Therefore, the (NASDAQ:PTON) stock might yet have further to rise in the eyes of many investors. And maybe that’s the way the cards fall.
Despite the stock’s recovery from last month’s lows, more factors are stacked against Peloton Interactive than in its favor.
The Peloton (NASDAQ:PTON) is obviously taking a defensive stance. Cutting costs, primarily if they affect a company’s ability to market its product (for example, closing stores or reducing sales and support personnel), is not a sign of strength. In the same way, outsourcing production may help you save money, but keeping tabs on quality and timeframes is challenging once they’re out of your hands. (NASDAQ:PTON) stock has more risk than reward potential because of the endless possibility that the economy might continue to show symptoms of weakening, reducing demand for high-end training equipment.
Featured Image: Megapixl © Michaelvi
Author Shariq Khan 
