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Why Peloton Interactive Was Falling 8% This Morning

By Rich Duprey - May 5, 2021 at 10:04AM

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The viral video of a child being dragged under one of its treadmills is coming back to haunt the fitness equipment maker.

What happened

Shares of Peloton Interactive (PTON -0.08%) were tumbling almost 8% lower in morning trading Wednesday after the high-end home fitness equipment maker announced it is recalling all its treadmills.

So what

There were actually two different recalls initiated. Peloton is recalling its Tread+ treadmill after a child was killed and over 70 other injuries, including of pets, were reported due to people and animals getting pulled underneath the moving treadmill. A video of one child getting dragged under a Peloton treadmill recently went viral on social media. About 125,000 Tread+ units are being recalled.

The second recall involves Peloton's Tread, its lower-cost treadmill, due to reports of the device's touchscreen possibly detaching during use and falling, increasing the risk of injury. About 1,050 Tread units are subject to the recall.

Man running on connected treadmill

Image source: Peloton Interactive.

Now what

Although the child's death was certainly tragic, the risk of injury from treadmills should be endemic to such devices generally, and not just to Peloton's equipment. However, as a high-profile growth stock making home fitness equipment, Peloton is subject to greater scrutiny.

The Consumer Products Safety Commission recommends returning the units to Peloton for a full refund. Alternatively, Peloton is offering to move the units to locations in the home where they will be inaccessible to children and pets. 

The equipment maker is also offering to implement software enhancements that will automatically lock the device after each use and require a four-digit passcode be entered before it can be activated.

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Peloton Interactive. The Motley Fool has a disclosure policy.

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Peloton Interactive, Inc. Stock Quote
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