Peloton unveiled a new line of AI-enabled products. Why did the stock fall 10%?

Fitness equipment maker Peloton, struggling to overcome a post-pandemic sales slump, held its first major presentation in years. The company unveiled an updated line of fitness equipment with Peloton IQ artificial intelligence system and simultaneously announced a price increase. Investors took the news negatively - the company's shares fell by 10% in trading on October 1. What do traders fear?

Peloton has unveiled a completely revamped line of fitness equipment with Peloton IQ, an integrated AI and computer vision system that provides users with analytics, feedback and personalized recommendations, Bloomberg reports. The Cross Training series includes two exercise bikes, two treadmills (in base and premium versions) and a rowing machine. The new system will also be available on the company's older devices via an operating system update. Equipment prices have increased by $150 to $700 and now range from $1695 for a basic exercise bike to $6695 for a Tread+ treadmill. Subscription fees have also increased by $3-6 per month.

According to product director Nick Caldwell, the Peloton IQ artificial intelligence system has become a key element of the company's strategy: it allows you to assess performance, track progress and adjust exercise technique using the new camera in the "+" models.

"This is the beginning of a new chapter for Peloton," emphasized CEO Peter Stern. - It's not just an upgrade, it's a relaunch".

In addition, the company also announced the acquisition of Breathwrk, an app that offers breathing practices to reduce stress, improve mood and sleep. The company plans to further integrate its products with Garmin and Apple devices, as well as launch a perimenopause program in partnership with actress Halle Berry's Respin Health platform.

Peloton shares plunged 10% in trading on Oct. 1, their biggest intraday decline since June 17, Bloomberg noted. Then, however, they slowed the fall to 5%.

Since the beginning of the year, the company's market value is down nearly 3%, while the main U.S. stock index, the S&P 500, by contrast, has added about 14% over the same period. At its peak in 2021, when the company's fitness equipment rapidly gained popularity amid lockdowns and gym closures, Peloton's stock price reached $171, but has since collapsed about 20-fold.

Investors sold off Peloton securities amid the announcement of price increases for equipment and subscriptions as part of a major lineup refresh, Bloomberg notes. That overshadowed the first serious attempt by new management to reverse years of slumping demand for the company's products since the end of the pandemic, the agency adds. Citizens analysts said the price hike could be a short-term barrier to increasing its user base. Bloomberg Intelligence analysts also noted that the company's business is being revitalized by innovation and AI adoption, but trends in the number of subscribers remain uncertain.

Truist Securities analyst Yousef Squali, in his turn, admitted that the sell-off may be related to the strategy "buy on rumors, sell on facts", when investors build up positions in advance, and after the announcement fix their profits, Barron's writes. At the same time, it's unclear how much the software and hardware upgrades will affect Peloton's performance, added Susan Anderson of Canaccord Genuity. She believes investors are generally positive about the upgrade, but are waiting for confirmation that it will lead to subscriber growth.

In general, the opinions of Wall Street analysts regarding the company's prospects differ: 11 advise to buy its securities, nine - to hold, and one believes that it is necessary to sell, according to MarketWatch. The average target price of $10 implies a potential upside of 11% to the closing price on Sept. 30.

This article was AI-translated and verified by a human editor