Peloton’s shares closed 35.3 percent lower on Friday, wiping $9.2 billion off the company’s valuation.
The drop in the stock value came after the fitness equipment manufacturer cut its annual sales forecast by $1 billion, prompting at least 15 analysts to lower their price target.
The company reported its slowest quarterly sales in more than a year with declining online traffic and more consumers returning back to the gym instead of engaging in at-home fitness routines. Meanwhile, those that are still buying Peloton equipment are choosing its new low-cost model. This shift is prompting Peloton to invest more in marketing spend, however, analysts have a negative outlook on the company’s growth strategy.
“There are plenty of new entrants fighting for mind and market share and that suggests that increasing marketing dollars will likely prove necessary, but hardly sufficient,” said BMO’s Simeon Siegel.
Credit Suisse analyst Kaumil Gajrawala believes that Peloton still has a chance of capturing the connected fitness opportunity, but its path appears to be growing “more difficult.”
Peloton has so far lost 63 percent of its share value this year.
The drop in the sales outlook has prompted Peloton to put an immediate freeze on hiring, the company announced Thursday.
“Some of these identified areas of savings include making significant adjustments to our hiring plans across the company, optimizing marketing spend and limiting showroom development…,” said Chief Financial Officer Jill Woodworth on a conference call.
Over the course of the pandemic, the New York-based company has been on a hiring spree. Peloton employed 6,743 workers as of June 30, which was more than double a year before.