What does the suspension of Peloton Interactive production mean?
The manufacturer of sports simulators Peloton Interactive Inc. (PTON), announced a temporary halt in producing its most expensive simulators. This caused the PTON quotes to fall by 24% to $24.22 at the auction on January 20.
A significant decrease in quotations is associated with a possible production shutdown duration. Peloton stopped production of some simulators due to reduced demand.
As a result, production volumes will vary by half will also the staff. The company expects sales to resume soon, and the current decline in demand is seasonal. However, internal reports show that the basic version of the Bike exercise bike may enter production again in April 2022.
The more expensive version of the Bike+ may return to production in the summer and may not produce the Tread+ treadmill until the end of June. All this will affect the indicators of the current fiscal year (ends June 30, 2022) and the hands of the first quarter of the new fiscal year. The announcement of the production shutdown was a piece of solid negative news for investors who purchased PTON shares on a fall in November – December, hoping for a speedy recovery of positive dynamics. Now, this is unlikely until the moment when Peloton will be able to provide positive news about the increase in sales. Peloton is currently trying to diversify its portfolio of solutions.
In particular, the company recently announced the expansion of branded clothing line. However, so far, this is an insignificant part of the business that requires investment and entry into highly competitive segments. The head of Peloton, John Foley, said that we are talking only about decreasing demand so far. That is, the company’s audience is not shrinking — current customers continue to use simulators and pay for a subscription to training.
