Peloton Slumps After U.S. Agency Warns on Treadmill Risks

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Peloton Interactive Inc. shares closed down 7.3% Monday after U.S. regulators warned consumers to stop using the exercise equipment maker’s Tread+ machine if there are young children or pets at home.

The advisory follows a series of accidents involving the treadmill. The U.S. Consumer Product Safety Commission (CPSC) said Saturday it is continuing to investigate incidents of injury or death related to the Tread+.

Peloton said in a statement that it was “concerned” by the commission’s warning, which it termed “misleading and inaccurate.” There’s no reason to stop using the Tread+ as long as all warnings and safety instructions are followed, it said.

JPMorgan Chase & Co. analyst Doug Anmuth reiterated his overweight rating on the stock and recommended buying during any pullback in the shares related to the CPSC’s warning.

“Peloton emphasizes that the Tread+ is safe when its warnings and safety instructions are followed, and the company will neither stop selling nor recall the Tread+,” Anmuth said in a research note. He doesn’t expect the recent incidents or the CPSC’s warning to further delay Peloton’s launch of its new lower-priced Tread in the U.S., he added.

The Tread+ warning doesn’t impact the long-term investment outlook for Peloton, according to Stifel analyst Scott Devitt. He expects the resolution for the Tread+ issue could be adding a protective guard to the end of the treadmill, or a similar remedy.

The stock closed at $107.75 Monday, bringing its decline so far this year to 30%.

What Bloomberg Intelligence Says:

“The Tread+ warning may not significantly slow Peloton’s near-term growth prospects, given that sales of exercise bikes still represent over 90% of hardware revenue. However, it could keep some customers from buying new treadmills.”
-- Amine Bensaid, BI media analyst

Click here to read the research.

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