On a day that the stock market is up over 1% overall, we have seen shares of Peloton Interactive (PTON 5.06%) drop as much as 10%. Shares clawed back some of those losses in afternoon trading but are still down 6.2% as of 2:30 p.m. ET.
The market continues to try to figure out what to do with a potential U.S. recession, rising interest rates, and a shift away from pandemic stocks. Today's loudest voice was the Financial Times, which highlighted that Peloton actually has an inventory problem on its hands now that demand for bikes and treadmills has fallen.
In the first quarter of 2021, Peloton had just 70 days of inventory on hand as demand for bikes skyrocketed and the company couldn't keep up. But at the end of the first quarter of 2022, the company has 225 days of inventory on hand. This is notable, because late last week there were multiple reports that the company is looking to raise $750 million in debt to try to survive the current drop in demand, which would in turn make the stock even riskier because of the debt hanging over the business.
Peloton is in a tough position until it can match its supply and demand. During the pandemic, the company built up capacity in hopes that demand and revenue would keep growing long-term, but that didn't happen as people went back to work and started cutting back on some spending. Now the company is just hoping to survive long enough to fight another day, which isn't a promising sign for investors.