What happened

Shares of Peloton Interactive (PTON -0.55%) were trading down 8.2% as of 11:53 a.m. EST Thursday, though there was no specific news relevant to the connected fitness company. Its shares have lost half their value over the past month, however, after it delivered a dismal fiscal first-quarter earnings report in early November.

The market is no longer convinced Peloton's business model will fare as well in a reopened economy as management had previously suggested. With gyms back in operation and outdoor fitness opportunities available, Peloton has been unable to gain any traction selling its pricey equipment.

Woman wiping forehead on stationary bike

Image source: Peloton Interactive.

So what

Any lift Peloton's business might have gotten from the discovery of the omicron variant of COVID-19 has dissipated, given that the early indications suggest that while the variant is more contagious than delta, it generally induces milder symptoms, and its spread shouldn't require a return to lockdowns. 

Pfizer (PFE) is also saying that its latest laboratory research suggests that people who have gotten three doses of its COVID-19 vaccine will have antibody protection against the omicron variant on par with what two doses offered for earlier variants. The pharmaceutical company's CEO has also suggested that people may need their next booster shots sooner than originally expected.

All of this means that Peloton will need to work harder on getting people to keep buying its bikes and treadmills, which is why it announced it was dropping the price on its entry-level bike by more than 20%. The company noted in its earnings report "there remains a lingering perception that Peloton is a luxury item." 

Now what

Just because a stock is cheap doesn't make it a buy. While fresh product introductions like its just-announced boxing classes may attract a few new people to Peloton's connected fitness classes, stationary bikes and treadmills are still its primary revenue drivers, and sales of those are falling.

As management admits, demand is tumbling more sharply than expected, which makes it unlikely that Peloton will be able to execute a turnaround anytime soon.