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Why Peloton Interactive Stock Continued to Sell Off This Week

By John Ballard – Nov 12, 2021 at 1:02PM

Key Points

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The great reopening has not been kind to the at-home workout provider.

What happened

Week to date, shares of Peloton Interactive (PTON 7.20%) were down 11.5% at 10:14 a.m. EST on Friday, according to data provided by S&P Global Market Intelligence.

The stock's free fall continued this week following Peloton's fiscal first-quarter results, issued on Nov. 4. Even the company's recent announcement that it was expanding its connected fitness product lineup with a new strength offering wasn't enough to buoy the shares. 

A person using an exercise bike.

Image source: Getty Images.

So what

The reopening of the economy has been a headwind for growth this year, yet Peloton is not having problems keeping existing users engaged. Subscribers are clearly satisfied with their Peloton Bikes, as noted by the 12-month retention rate remaining stable at 92% last quarter. That is a big positive, but management's lower revenue guidance for the full year, on top of a reported net loss of $376 million on the bottom line, was enough to make investors rethink the value underpinning the shares at these levels.

Now what

On a positive note, Peloton's release of its first connected fitness product designed specifically for strength workouts is a catalyst to watch. The Peloton Guide is an AI-enabled device that connects to a user's TV and costs $750, just about half of what a Peloton Bike costs. This might help drive some extra sales in the near term.

It's unclear if the company's forward guidance of 14% revenue growth for fiscal 2022 included any sales from the new strength offering, but there could be a lot of pent-up demand for Peloton Guide, since strength has been a growing area of interest for subscribers over the last few years. 

John Ballard 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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