Week to date, shares of Peloton Interactive (PTON 4.29%) were down 27% through Thursday's market close, according to data provided by S&P Global Market Intelligence. The company's progress in turning the business around has been slower than investors hoped, which has continued to weigh on the stock's performance in 2024.
The latest earnings report for the quarter ending in December showed improving profitability, but the biggest problem continues to be a lack of growth for Peloton's products, and there may not be an easy fix.
What's wrong with Peloton stock
Peloton has tried a lot things to stimulate demand. Bike rentals are showing promise, but rentals are not enough to drive revenue growth at this point, as weak demand for pricey exercise equipment continues to be the main problem. As a result, total revenue declined 6% year over year last quarter.
What's most concerning is that CEO Barry McCarthy called out Peloton's failure in member support during the holiday season. "The member support experience has tarnished our brand, and we simply must do better," McCarthy said. It's tough to grow the business when you're not investing in quality service, which is crucial for these products.
Don't expect a quick rebound
Peloton is a popular fitness brand, with nearly 3 million paid connected fitness members (6.7 million when including subscriptions to the Peloton app). But despite strong growth through retail partner channels, paid connected fitness subscriptions only notched a 1% increase. Peloton forecasts a return to revenue growth in the fiscal fourth quarter ending in June, but it now expects to fall short of achieving positive free cash flow for the full year.
The stock isn't likely to rebound until investors see balanced top- and bottom-line growth, and it seems that will take longer to achieve than the company originally expected.
