What happened

Shares of Peloton Interactive (NASDAQ:PTON) were slipping Monday, more than reversing their gains from Friday as investors readjusted their threat assessment relative to the new omicron COVID-19 variant.

While stocks fell broadly on Friday, Peloton and other pandemic winners rose as the market anticipated them benefiting from reinvigorated social distancing measures. However, such stocks were largely giving those gains back Monday morning.

After Peloton rose 5.7% on Friday, it was down 7% as of 11:41 a.m. ET.

A woman riding a Peloton in her living room.

Image source: Peloton.

So what

Over the weekend, the U.S. banned flights from several southern African countries in an effort to slow the spread of the new variant of concern, but on Monday, investors seemed to be taking the view that the market on Friday had overreacted to the threat.

Reuters quoted one South African doctor who said that thus far, symptoms from omicron were "very mild" in patients she had seen. Other experts have made similar statements, including a virologist who advises the South African government, who on a Sky News program Sunday said that the early omicron cases seen in his country have all been "mild to moderate cases." These assertions have helped ease the market's fears that omicron could deal another blow to a global economy. Additionally, Moderna has said it could have an omicron-specific COVID-19 vaccine ready by early 2022.

Peloton was a big winner during the earlier phases of the pandemic as stay-at-home orders and social distancing shut down most gyms. However, the stock has now given up the majority of its gains from 2020, and its latest earnings report showed that the company's sales growth has nearly ground to a halt. Revenue rose just 6% in its fiscal 2022 first quarter (which ended Sept. 30) as sales of its exercise equipment fell, indicating that interest in its connected fitness platform may have peaked. Management also slashed its guidance for the full year.

Now what

In the aftermath of that quarterly report, the company announced a hiring freeze, and followed that with word of a $1 billion stock offering, even though management said during the earnings call that it wasn't looking to raise capital. Overall, recent events paint a picture of a company in disarray, especially as it spent aggressively on marketing while demand is falling.

Another major COVID-19 wave, particularly one that pushes people back to their 2020 behaviors, could give the stock a modest boost. But the company's latest quarterly report makes it clear that Peloton needs to figure how to maintain its momentum in a normal business environment.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.