We can talk about earnings and revenues all day long, but unfortunately the headline story concerning Peloton Interactive (NASDAQ:PTON) involves the loss of life, and that’s the most important consideration for PTON stock traders right now.
In terms of the company’s reputation, Peloton is in damage control mode. Current and prospective shareholders should keep an eye out for developments as this is a still-ongoing story.
But for the time being, the best that we can do is assess what’s happened and how Peloton is responding to the tragedy.
Ultimately, the best response is not to seize the moment in haste as an opportunist, but to weigh the gravity of the situation and respond with due consideration.
A Closer Look at PTON Stock
It’s not unreasonable to claim that PTON stockholders fared well during the past year.
The share price hit rock bottom slightly below $20 in March of 2020, but a powerful rebound ensued.
For the next half-year, the bulls took control and pushed the share price up to $136 in October 2020. Then came a head-fake to the downside, but the bulls staged a comeback as the stock price surged to over $150 in December.
Next, in January of 2021, PTON stock topped out at a 52-week high of $171.09. February and March proved to be challenging for shareholders as the stock fell below the key $110 level.
So now the bulls have some catching up to do. Retaking the $130 area with heavy buying volume will be crucial before the bulls can capture and hold $150 again.
A Critical Incident
Throughout much of 2020, it was presumed that Peloton’s business would continue to thrive indefinitely.
The hypothesis was that, due to the lockdowns pandemic, people would choose to exercise at home rather than at gyms.
That might have been a reasonable assumption for a while. PTON stockholders might be concerned nowadays, though, that the availability of Covid-19 vaccines could encourage folks to venture out to gyms again.
However, that concern seemed minor in comparison to a pair of highly unfortunate incidents that took place recently.
The first incident, as reported by the United States Consumer Product Safety Commission, involved a three-year-old child:
“3 yo boy was trapped under a Peloton Tread Plus, found by his father to be not breathing and pulseless – he was resuscitated and now has significant brain injury. He was found to have tread marks on his back matching the slats of the treadmill, neck injury, and petechiae on his face, presumably from occlusion of blood flow.”
As shocking at that incident is, it was soon followed by another terrible accident involving Peloton equipment.
Reflecting on a Tragedy
On March 17, Peloton stated that the company had been informed by a member that the three-year-old child was “expected to fully recover.”
But then, reportedly a young child (different from the one discussed above) was killed in an accident involving a Tread Plus treadmill.
“We are aware of the incident and are investigating it,” the United States Consumer Product Safety Commission said.
Peloton Interactive CEO John Foley responded promptly. “Each [accident] is devastating to all of us at Peloton, and our hearts go out to the families involved,” he said.
“We are currently assessing ways to reinforce our warnings about these critical safety precautions to hopefully prevent future accidents,” Foley added.
So now, investors must reflect on the CEO’s response and Peloton’s future prospects. Will the reputational damage ruin the company?
One has to wonder whether people will continue to buy treadmills that cost over $2,400. At that price, consumers should demand extremely rigorous safety measures.
PTON Stock: The Bottom Line
There’s no disputing that the incidents mentioned above are horrendous. Hopefully, there won’t be any more tragedies to report.
That being said, it would be hasty to conclude that Peloton’s business is ruined. The consumers and investors might be able to forgive Peloton after a while.
But for now, I would assess PTON stock as a “wait and see” type of investment. There’s really nothing wrong with sitting on the sidelines and monitoring the situation.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.