The biggest market story of 2022 is the absolute evisceration of the high-multiple, growth stocks which had such spectacular performances in 2020 and 2021. Many of these were companies that saw an acceleration in earnings and revenues from the pandemic like Peloton Interactive
Peloton is maybe the best example given that its stock price rose tenfold from its low in March 2020 around $17 to its high of over $170 in January 2021. Notably, there was significant skepticism about the company's valuation given that the product was an exercise bike with a tablet and a subscription that didn't seem much different than other exercise bikes. The stock has given up the bulk of its gains with its recent decline to $23.
Now, the company is facing a much tougher environment as revenues are slowing due to weaker demand and increased competition. Recently, the company hired McKinsey to review its strategic options. Some of the options it is reportedly considering are cutting jobs, lowering costs, and adding on additional charges for the delivery and assembly of its items.
The company also recently launched its own apparel division which has received poor marks so far and drawn scrutiny for its similarity to Lululemon
Many expected the company would take weeks or months before finally deciding on its plan. However, the company acted with urgency and announced a day later that it was temporarily halting the production of new bikes and treadmills due to poor demand. The stated reason is that demand for its products had precipitously declined due to customers returning to pre-pandemic routines and behavior and the availability of competing products at a much cheaper price point.
The bigger takeaway is that for a brief moment in time, Peloton was seen and valued like a tech company rather than a fitness company. However, this is clearly no longer the case and in hindsight, it's obvious that Peloton was simply another fitness fad that had perfect timing due to the pandemic which enabled it to reach stratospheric heights for a few months.