Peloton stock price has had a remarkable collapse in the past few months. The shares have crashed by over 75% in 2022, making it one of the worst collapses in corporate America. A company that was once valued at over $41 billion is now valued at about $2 billion. So, will PTON ever bounce back?
Why has Peloton collapsed?
Peloton has had a spectacular downfall in the past few years. The firm, which revolutionized the fitness industry, has had a remarkable fall as the firm faces numerous changes. It is not alone. We have seen the collapse of high-flying companies like WeWork, Affirm, Boxed, and Waitr among others
The main reason why Peloton and these companies have crashed is the Federal Reserve. In 2022, the Fed has hiked interest rates by 300 basis points and hinted that it will continue hiking in the coming months. As a result, the US dollar has surged and bond yields climbed to the highest level in more than two decades.
Historically, high-risk and unprofitable companies tend to underperform in periods of extreme central bank tightening. Indeed, the tech-heavy Nasdaq 100 index has fallen by more than 30% this year while Cathie Wood’s Ark Innovation Fund has crashed by over 57%.
Peloton Interactive stock price has also fallen because of internal issues. With inflation rising, demand for its products has fallen. In August, the company said that its revenue dropped by 27% year-on-year to $678 million while its EPS dropped to minus $1.32. The company’s net loss crashed from more than $757 million in Q1 to more than $1.25 billion.
Peloton Interactive has been going through a turnaround strategy that focuses mostly on its digital subscription business. As a result, the firm has made the decision to make its products available in more places like Amazon and Dick’s Sporting Goods. It has also lowered their prices. While this move is welcome, the implication is that it will dilute its brand. The firm has also announced a management shakeup.
Peloton stock price forecast
One of the top questions is whether the Peloton stock price will recover any time soon. A closer look at the weekly chart shows that the stock has been in a strong bearish trend in the past few months. It has managed to fall below the important support level at $17.8, which was the lowest level in March 2020.
This price was also along the lower side of the inverted cup and handle pattern. In price action analysis, this pattern is usually extremely bearish. It has also crashed below all moving averages while the Awesome Oscillator has formed a bullish divergence pattern.
Therefore, the stock will likely continue falling as sellers target moving below $5. As such, this will transition the stock into a penny stock. In the long term, we can’t rule out a situation where the stock bounces back.