Peloton's (Nasdaq: PTON) fortunes have crumbled over the last year. The company was one of the best-performing stocks during the pandemic as sales surged with gyms closed or people not willing to risk exposure. The stock also appealed to tech investors as the bike came with a subscription product that would constantly generate revenue.
As a result, the stock enjoyed spectacular gains, rising 866% from its low in March 2020 to its peak in February 2021. Since then, shares are lower by 86% as the stock has wiped out 90% of its advance. The major factor was a sharp slowdown in sales as the economy returned to normal. In fact, prices of equipment are down considerably on secondary markets, and the company had to halt production due to inadequate demand. Another headwind was inflation and rising rates which leads to outflows from high-multiple, overvalued growth stocks.
Now, the company is in a fight for survival and relevancy and is undergoing a major restructuring. Part of this involves cutting its prices on bikes and treadmills to get new customers, while raising subscription fees to increase monetization from its most loyal users.
This is the first major change under new CEO Barry McCarthy. The changes will go into effect on June 1 as monthly fees will rise from $39 to $44. Prices on bikes and treadmills were immediately slashed with the Bike going to $1,445 from $1,745 with similar cuts of 10 to 15% for its Bike+ and treadmill. It's also conducting a pilot program to allow people to rent Pelotons for a monthly fee between $60 and $100. It also started selling a new piece of strength equipment, the Peloton Guide for $295 which is $200 less than expected. However, the reception for the Guide has been less than enthusiastic.
The common goal is to increase the size of the Peloton community while increasing monetization on the back-end. In total, the company has 2.8 million subscribers and 6.6 million total members. It also has a sizeable base of users who pay for its content but don't use the equipment. Another impressive aspect is that its churn rate is 0.8% which is quite low with users averaging about 15.5 workouts per month. It also continues to add new types of workouts including yoga, meditation, and kickboxing.