Has David Jones backed a big loser, with their decision to allow struggling US Company Peloton Interactive to take up space in their stores?
The one-time Wall Street darling who launched in Australia earlier this year is crashing and crashing hard, with many questioning whether they have a future.
Back in 2020, Peloton Interactive stock soared 434 per cent. That was until people started getting injured using their equipment, then a child died.
According to Bloomberg BMO Capital Markets’ Simeon Siegel was the first bear to predict the stock’s subsequent crash, and he says the pain isn’t over.
“From the beginning, our concern was that Covid was going to prove a pull forward of demand rather than an expansion of it,” he said by phone. “That’s what we’re seeing right now — the faltering of demand. The problem was when 80% of the company’s business is driven by equipment sales and equipment sales are generally a onetime thing.”
Peloton shares have badly underperformed this year amid slowing sales.
Locally, the business is not saying how well sales are going but according to David Jones insiders the product is seen as being “expensive”.
In a Dec. 9 report, he questioned whether Peloton was losing control over its brand image when the company was forced to do some damage control after an iconic television character in the new “Sex and the City” show “And Just Like That…” died after using a Peloton bike.
“To all of their credit, Peloton’s marketing team is one of the best in the industry,” Siegel said. “And they did a fantastic job in telling that story and having people feel a part of something bigger. The problem was the story became louder than the numbers.”
Recently, Peloton shares have dropped in six of the seven weeks since the company’s quarterly update. The stock is down about 76 per cent in 2021, making it the worst performer in the Nasdaq 100 Index, which is up 28 per cent this year.
