The stock market has been turbulent in 2022, and several attempts to rebound have been met with resistance. That was the case again for the Nasdaq Composite (^IXIC 0.73%) on Thursday, as the index had been up significantly for most of the session before falling sharply in the last hour of trading. By the end of the day, the Nasdaq lost 186 points, or 1.3%, to 14,154.
There were plenty of big decliners on the Nasdaq on Thursday, but two of the worst were Peloton Interactive (PTON 10.16%) and TaskUs (TASK 0.77%). Both stocks came into the day having already seen big declines from their levels just a couple of months ago, but additional bad news worsened sentiment even more. Here are the details.
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Peloton hits the pavement again
Peloton shares were down 24% on Thursday, bringing the total drop in the interactive fitness-equipment specialist's stock to more than 85% since late 2020 and early 2021. After all the setbacks that Peloton has suffered, today's seemed to introduce the most uncertainty about what the future will bring for the company.
Reports surfaced in the early afternoon that Peloton would temporarily halt its production of bikes and treadmills. Citing internal Peloton documents as sources, the reports said that the company had experienced falling demand for its fitness equipment.
It could be a long time before some equipment models return to production. The lower-priced Bike product might be back in production by April, but it could be summer before the higher-priced Bike+ starts coming off assembly lines again. Even worse, the Tread+ treadmill product might not see any production through the end of its 2022 fiscal year on June 30.
Many investors had hoped that the sharp drop in Peloton in 2021 might make now a good time to buy the stock. That hasn't proven to be the case, and it now appears that fundamental business problems might take a longer time to fix than hoped.
A tough task for TaskUs
Elsewhere, shares of TaskUs fell more than 15% on Thursday. The business-process outsourcing specialist found itself the target of a short-selling research report that raised some questions about its future prospects.
Analysts at Spruce Point Capital Management released a report that made serious allegations against TaskUs, including what it characterized as a "pattern of exaggerated and inflated business claims." The short-selling investment-research company cited a heavy concentration of business in a single customer and suggested that the relationship between TaskUs and that customer might be worsening in a way that would threaten a major part of the company's business.
As a result, Spruce Point believes that TaskUs stock could fall between 25% and 50%. That would take the stock price to between $18 and $27 per share, and today's decline to just above $30 per share already took care of a big chunk of that predicted 25% downward move.
To be clear, Spruce Point doesn't think that the entire industry is fraught with peril. Indeed, while the research company is short TaskUs, it has long positions in two of its competitors, Concentrix (CNXC +1.21%) and European company Majorel Group Luxembourg. For its part, Concentrix didn't get much of a boost, with its shares rising just 2% on the news.
There was a time when anything that had to do with cutting-edge tech could count on consistently rising. That's no longer the case, and companies like TaskUs will have to prove their mettle in order to avoid further declines.
