Although home exercise equipment specialist Peloton Interactive (NASDAQ:PTON) enjoyed an auspicious start following its initial public offering, let’s be real: the extraordinary ride that followed during the new normal was mostly due to the coronavirus pandemic.
Even in the best of circumstances, public fitness facilities aren’t exactly the most sanitary of conditions. Back when I was working in the hallways of corporate America, I would make use of campus gyms during my lunch break. Let’s just say that some of the best and brightest of this country are not the most hygienic.
Indeed, every working environment I’ve been in always featured someone who let transactions go unprocessed. Honestly, for the love of humanity, why?
Well, with a Peloton exercise bike, you can significantly mitigate person-to-person contact in the gym, which was the central thesis undergirding PTON stock pre-pandemic. Post-pandemic, this catalyst took on extraordinary relevance. In the early days of the global health crisis, no one wanted to be around each other.
From the first CDC briefing indicating that the “disruption to everyday life might be severe,” on Feb. 25, 2020, to the rollout of vaccines 10 months later (see chart below), PTON stock climbed a whopping 371% while the S&P 500 index managed a 19.7% gain. Then, from its mid-January 2021 high until the sacking of its CEO and the firing of 2,900 employees, Peloton stock declined 71% while the index added 24%.
Even as we acclimated to the new normal, worrying threats posed by either more deadly or more infectious variants kept people in their homes. Naturally, this circumstance led to poor general health results for many people.
According to patient data research cited by Harvard Health Publishing, “39% of patients gained weight during the pandemic, with weight gain defined as above the normal fluctuation of 2.5 pounds. Approximately 27% gained less than 12.5 pounds and about 10% gained more than 12.5 pounds, with 2% gaining over 27.5 pounds.”
Though terribly cynical, you couldn’t ask for a better narrative for PTON stock. With its compelling home exercise bikes and weight-loss regimen, Peloton offered a way to stay fit and healthy without exposing oneself to the “plague.”
Now, the plague is Peloton itself.
New Fears Overshadow Narrative for PTON Stock
The Germans seem to have a word for everything. One of my favorites is schadenfreude, or the concept of people taking pleasure in others’ misery. Admittedly, it’s a crude concept but I’m glad that the Germans gave voice to the concept because it happens. There’s no point in denying it.
Just look at PTON stock. Essentially, the underlying business benefitted from the schadenfreude of the pandemic as people eschewed in-person fitness solutions for the at-home variety. However, the problem now is that the other side of the blade is cutting into Peloton’s business.
As you know, the world is now concentrated on Russia’s invasion of Ukraine. Contrary to what others might think, it’s the single-most important flashpoint that affects everything else, especially after a brazen and reckless assault on a Ukrainian power plant — Europe’s biggest.
If that thing blows, the world would have no choice but to go to war. Amid such a stark backdrop, Covid-19 is merely a drop in the bucket. Against an apocalyptic threat, folks just don’t care as much about the coronavirus, which is bad news for PTON stock.
Fear of infection is what kept shares rising higher. But I think I speak for everyone — fear of radiation poisoning is a much more severe problem. And I don’t care how many times you cycle through your exercise bike, aerobic fitness is not going to protect you from radiation poisoning.
What’s perhaps tragic for PTON stock is that the Covid threat is still very much real. As Fortune reported, a new subvariant is upon us, one that may be even more contagious than the omicron variant.
Does anyone care?
Some do, I’m sure of it. But many others are Covid fatigued, especially in light of seriously pressing concerns.
Normalization is Peloton’s Only Hope
Ironically, normalization may be the only hope for PTON stock, at least in the geopolitical front. So long as people are afraid of something other than Covid-19, the prospect for Peloton — or any home-exercise-related investment — isn’t great.
But will conditions cool down to benefit PTON stock? It’s difficult to say. Even if the geopolitical flashpoint reaches a diplomatic solution, domestically, we have many other concerns such as soaring consumer inflation and a delicate economic recovery to worry about.
These and other factors can steal attention away from the pandemic, making Peloton a tough bet. Now, in fairness, PTON looks attractive from a speculation point of view. It’s still an exciting brand, which could mean something. However, unless you’re a hardened gambler, I would approach Peloton with extreme caution now that the paradigm has shifted.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.