(Bloomberg) — Peloton Interactive Inc. tumbled Friday after quarterly results fell short of expectations, the latest setback in a year marked by product recalls and waning consumer interest.
The at-home fitness company slumped after its first-quarter sales outlook missed analyst expectations as it cut the price of its most popular bike in an attempt to broaden its customer base. It also said Friday it was subpoenaed by the U.S. Department of Justice and the Department of Homeland Security for information related to injuries reported by Peloton users.
The 8.6% share-price decline marks the worst drop since early May when the company recalled its Tread and Tread+ treadmills after reports of injuries and a child’s death. Peloton unveiled detailed restart-sales plans for the lower-priced Tread product on Tuesday, delivering a boost to the stock.
“This is as close to a ‘disaster’ as a company can get vs. expectations,” Vital Knowledge founder Adam Crisafulli wrote. “The internal controls headline doesn’t sound like a huge problem, but that’s just one more negative to throw on top of this quarter.”
While shares are up 27% since bottoming out in May, they have struggled to find their footing after soaring in 2020. The company had shed more than a third of its value from a January 13 record, lagging a 19% rise for the S&P 500 over that stretch.
Peloton’s latest struggles has it treading water alongside other companies that saw boosts from stuck-at-home consumers due to the pandemic. With gyms and restaurants reopening, the company is taking a hit, which “may be among the largest” for stocks that saw a spike in demand during the pandemic, according Crisafulli.
Despite the rocky view for the first-quarter, optimistic analysts stuck to their calls with the average 12-month price target holding steady at about $132. That implies a 26% return from Friday’s trading.
The fitness company’s enthusiasm surrounding the upcoming launch of Tread indicates the treadmill will likely drive the next leg of growth, according to BofA analyst Justin Post, who upgraded shares to buy from neutral.
Peloton has been a darling of Wall Street since its debut in with investors Baillie Gifford & Co. and Chase Coleman’s Tiger Global Management among its five largest holders. And the returns for early investors have been massive with the stock nearly tripling through trading prior to the earnings report despite the recent volatility.
(Updates share movement throughout, adds BofA upgrade in 8th paragraph.)
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