Peloton was making news for its exercise equipment but recent news caused a scare in the stock price. The New York-based company recalled all of its treadmills after a recent infant death and dozens of injuries reported on its treadmill. This caused the stock price to fall to a recent low of $82.62. The all-time high of the stock was $171.09.
Over the past year with the coronavirus, the company performed well. People were staying home with the coronavirus. This increased demand for stay-at-home exercise equipment.
New York saw a rise in unemployment rate reach a high of 10% in 2020 from a low of 3.8% a year prior.
The unemployment rate in New York surged during the coronavirus epidemic.
Two months ago, Governor Cuomo extended the closing times to 11 pm for the gym and other facilities in New York. Recently Gover Cuomo allowed gyms to reopen with some measures to take.
The status of gyms opening and closing, this caused a lot of residents to work at home.
"Widespread fear is your friend as an investor because it serves up bargain purchases." Warren Buffett
The company invested heavily in its supply process and was seeing demand return to pre-COVID levels. In the 4th quarter, revenue grew to $1.26 billion which was up 141%. Subscription revenue grew to $239.4 million with 2.08 million Connected Fitness Subscriptions.
Peloton saw its subscription base reach an all-time high of 149.5 million.
"The best thing that happens to us is when a great company gets into temporary trouble...We want to buy them when they're on the operating table." Warren Buffett
It’s unfortunate a child died as a result of Peloton and others were injured. The company is doing the right thing by recalling the equipment.
Peloton is offering full refunds for the treadmill and waiving three months of treadmill memberships.
“Our goal is to have the best safety features for treadmill products on the market,” Chief Executive John Foley said during the earnings conference call.
Stock market analysts have a favorable opinion of the company.
“While the recall will hit financials in the short term, and push back Tread financials a quarter or two, we think this was the prudent decision in the long term,” Barclays analyst Mario Lu said in a note to clients. “We continue to view Peloton as the leading company in connected digital fitness.”
Final thoughts
For the past few months, I have followed news about the stock price and its continued rise. When news of Peloton made recent news, the stock price dropped considerably.
Price of the stock. Once I saw the price level off in the low $80s, I figured this was a good time to buy.
The price may not rebound in a week or next month, but over time, I expect the price to rebound close to its all-time high. Sometimes waiting works out instead of chasing them at all-time highs.
Exercise. Due to the pandemic, some people are exercising more and working out at home. Peloton offers its customers the flexibility to work out at home without having to pay for a gym membership. Even with the virus declining some, people will still work out at home.
When the price of Peloton was in the $170s, I was interested but not going to buy the stock. Sometimes you have to wait for a pullback in the market. You never know when they happen but they happen from time to time.
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