Why Peloton Stock Tumbled on Tuesday

What happened

Many stocks are not doing well in these early weeks of 2022, but Peloton Interactive (NASDAQ:PTON) is a particularly notable decliner.

Battered by news of production “resetting,” preliminary results that indicated some weaker-than-expected fundamentals, and an activist investor’s call for significant change, the stock has received another blow. A disquieting tweet from a reporter following the company raised a new item of concern for investors. As a result, Peloton shares closed Tuesday nearly 11% lower.

So what

Fox Business News reporter Charles Gasparino published a tweet that indicated a potential sale of Peloton wasn’t in the cards:

BREAKING: Private equity is snooping around [Peloton] but not hearing any resounding interest. Firms believe stock is still over-valued, management is a mess that [would] take too much to fix even in private hands. Wouldnt shocked by a deal but it seems much less than 50 50.

Exhausted woman lying on the ground after a workout.

Image source: ..

Gasparino did not cite any sources for his assertion, and Peloton has not officially responded to it.

Activist investor Blackwells Capital is pushing for the company to replace CEO and co-founder John Foley, and to put itself up for sale.

“Despite the incontrovertible mismanagement of the company, Peloton has a large and loyal customer base, skilled employees, great technology and content, and a respected brand,” Blackwells wrote in a letter to the company’s board of directors.

“A stand-alone Peloton, however, will still not be able to fully exploit the opportunities its assets and brand enable — especially now with a pressured balance sheet, significant cash burn, and loss of investor confidence,” Blackwells added.

Now what

Gasparino’s tweet is the latest in a cascade of bad news and publicity for the company, in what should be a fruitful period for a business that makes exercise equipment and streams fitness classes. The beginning of the year is typically when people sign up for such classes or invest in this type of equipment.

Peloton management has a rapidly growing pile of challenging issues it needs to deal with. Early indications aren’t promising, so this looks like a stock to avoid for now.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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