Can this ailing inventory get again into form in turbulent markets?

Wednesday gave Wall Street another mixed day as inflationary pressures remained on investors’ minds, even though Fed Chairman Jerome Powell continued to believe the price hikes would prove fleeting. The S&P 500 (SNPINDEX: ^ GSPC) and Dow Jones industry average (DJINDIZES: ^ DJI) moved higher in the day while the Nasdaq composite (NASDAQINDEX: ^ IXIC) Easily liked.


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Data source: Yahoo! Finances.

Since the beginning of 2021 Peloton interactive (NASDAQ: PTON) has seen even more volatility than the rest of the stock market. Amid controversy that led to a major product recall, Peloton stock lost half its value, but it has rebounded significantly in recent months. On Wednesday, Wall Street analysts voiced a view that affected the stock. Below you will learn the details and get a different perspective on Peloton’s current situation.

Image source: Peloton Interactive.

Fight for first movers

Analyst comments on Peloton dropped the stock by more than 5% on Wednesday. The negative assessment came from Wedbush, who downgraded the share of the sports equipment manufacturer from above-average to neutral.

Wedbush shares the same view as many people who look at companies that thrived during the pandemic. With the economy reopening, Wedbush said, fitness enthusiasts will again have the opportunity to return to personal workouts in a variety of venues, from traditional gyms and fitness centers to personal trainers and dedicated spaces like yoga centers. That will create massive competition for Peloton.

At the same time, Peloton must also defend its leadership role in home fitness. Companies like nautilus (NYSE: NLS) enter the market with their own device options, while others focus on duplicating the fitness-related content that Peloton offers through its affiliated fitness network. Even those who choose to stay home to exercise may not necessarily have to resort to Peloton products for a quality workout.

Looking for innovation

The tragic accidents involving Peloton’s treadmill products and their subsequent recall have diverted attention from the company’s greatest asset: its user network. In any business that relies on recurring income, keeping existing customers happy is important, and finding ways to show more people the benefits of your product is an important part of future growth.

With that in mind, Peloton’s recent decision to turn to large corporations to support its fitness endeavors is a wise one. The connected fitness specialist has introduced a corporate wellness program that he wants to market to large employers in order to keep their employees engaged and fit. The program gives employees access to fitness content for subscribers, and various team building and competitive efforts could help reduce employee turnover and burnout while increasing productivity.

Peloton’s acquisition of Precor also opens the door to larger sales direct to fitness centers. Whether this will turn into a full rollout of Peloton-focused gyms or simply leverage Precor’s existing gym relationships to generate additional revenue remains to be seen. In either case, however, Peloton has many strategic decisions to consider.

Peloton took shareholders on a roller coaster ride, but the fitness equipment maker still has a lot to offer. If it can successfully cope with the difficult current environment, Peloton could do better in the future.

This article represents the opinion of the author who may disagree with the “official” referral position of a premium advisory service from the Motley Fool. We are colorful! Questioning an investment thesis – even one of our own – helps us all think critically about investing and make decisions that will help us get smarter, happier, and richer.

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