Is the Peloton (PTON) Scandal Creating a Bargain?

May 09, 2021

Peloton shares tanked earlier this week after the company recalled all Tread and Tread+ treadmills, a decision based on reports of 70+ injuries and one death.

If you haven’t heard about what’s going on, here’s the situation:

The U.S. Consumer Product Safety Commission (CPSC) warned consumers to stop using the Peloton Tread+ in April based on safety concerns.

Peloton initially refuted these CPSC claims, calling them misleading and inaccurate.

But earlier this week, Peloton admitted it was wrong to fight the CPSC and issued a recall impacting 125,000 treadmills:

“I want to be clear, Peloton made a mistake in our initial response to the CPSC’s request,” said Peloton CEO John Foley. “We should have engaged more productively with them from the outset. For that, I apologize.”

And here lies the important question: Did these events and decisions move the needle when it comes to Consumer Sentiment?

Take a look:

May 5 was the largest spike in Negative Sentiment that LikeFolio has recorded for Peloton. Sentiment plunged 30 points in a day to 47.5% positive.

However, Sentiment had recovered prior to this recall. Even post-CPSC warning, Consumer Sentiment Mentions were averaging higher than 80% positive.

We’ll be watching Sentiment closely to understand any long-term impacts, but anticipate this to be a “flash in the pan” type of negative event.

On the flip side, we know consumer demand for Peloton products remains extremely high.

While the rate of growth tempered in the last quarter, 21Q3 was the largest consumer demand bar we’ve ever recorded.

So now, as investors, we have to ask: Does this sell-off present a long-term investment opportunity?

Answer: Probably so.

Peloton App Usage shows retention.

On its earnings report last week, Peloton confirmed what LikeFolio users already know: sales increased 141% as cycle demand remains strong.

We’ll be keeping a very close eye on LikeFolio’s real-time consumer demand and happiness levels for Peloton products over the next few critical weeks.

After all, it’s possible that the current turbulence for traders of PTON stock may turn out to be a golden opportunity for generational investors. As always, LikeFolio members will be the first to know! Enjoy!

Andy Swan,
Founder, LikeFolio