In Turbulent Markets, Can This Beaten-Down Stock Get Itself Back in Shape?

Wednesday brought another mixed day to Wall Street, as inflationary pressures remained on investors' minds even as Fed Chair Jerome Powell remained convinced that price increases would prove fleeting. The S&P 500 (^GSPC 0.02%) and Dow Jones Industrial Average (^DJI -0.11%) moved higher on the day, while the Nasdaq Composite (^IXIC 0.10%) fell slightly.

Data source: Yahoo! Finance.

Since the beginning of 2021, Peloton Interactive (PTON -2.24%) has seen even more volatility than the rest of the stock market. Amid controversy that led to a major product recall, Peloton's stock lost half its value, but it has bounced back considerably in the past couple of months. On Wednesday, Wall Street analysts weighed in with a view that had an impact on the stock. Below, you'll learn the details and get another perspective on Peloton's current situation.

Image source: Peloton Interactive.

Fighting to remain first-mover

Analyst comments on Peloton sent the stock down more than 5% on Wednesday. The downbeat assessment came from Wedbush, which downgraded the exercise equipment maker's stock from outperform to neutral.

Wedbush shares the same view as many people looking at businesses that prospered during the pandemic. As the economy reopens, Wedbush said, fitness enthusiasts will once again have the ability to return to in-person workouts at a variety of venues, ranging from traditional gyms and fitness centers to personal trainers and specialty spaces like yoga centers. That will provide massive competition for Peloton.

At the same time, Peloton also must defend its leadership role in at-home fitness. Companies like Nautilus (NLS) are coming out with equipment options of their own, while others are concentrating on duplicating the fitness-related content that Peloton provides through its connected fitness network. Even those who choose to stay home to exercise won't necessarily have to go with Peloton products to get a high-quality workout.

Looking for innovation

The tragic accidents involving Peloton's treadmill products and their subsequent recall have taken attention away from the company's biggest asset: its network of users. With any business that relies on recurring revenue, keeping existing customers happy is essential, and finding ways to show more people the benefits of your product is a key ingredient for future growth.

With that as context, Peloton's most recent decision to turn to big business to support its fitness efforts is a smart one. The connected fitness specialist introduced a corporate wellness program, which it intends to market to large employers as a way to keep their workforces engaged and fit. Under the program, employees will have access to subscriber fitness content, and various team-building and competitive efforts could help reduce employee turnover and burnout while boosting productivity.

Peloton's acquisition of Precor also opens the door to more extensive sales directly to fitness centers. Whether that turns into a full-scale rollout of Peloton-focused gyms or simply uses Precor's existing relationships with gyms to provide some incremental sales remains to be seen. In any event, though, Peloton has a lot of strategic choices to consider.

Peloton has taken shareholders on a roller-coaster ride, but the fitness equipment company still has a lot going for it. If it can successfully navigate its tough current environment, then things could look up in Peloton's future.