Can omicron turn around Peloton, one of the year’s worst performing stocks?

At the back of the pack.
At the back of the pack.
Image: Reuters/Shannon Stapleton
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Peloton, a high-flyer during the first year of the pandemic, has been one of the worst performing stocks in 2021 as people return to offices and gyms. Will the omicron variant of Covid-19 give the exercise company’s shares a second wind?

Peloton stock jumped 6% on Nov. 26 as traders dumped travel-sensitive shares of carriers like Delta Air Lines and major lenders like Bank of America, whose fortunes are tightly linked to economic growth. Experts are racing to assess how lethal and transmissible omicron is compared to other variants of covid-19, which will determine whether renewed lockdowns and travel restrictions will be needed. The exercise company’s shares drooped again in trading today (Nov. 29) as the investors in the overall stock market regained enthusiasm and recovered some of last week’s losses.

Why is Peloton stock going down?

Peloton was beloved by stock investors when gyms and just about everything else were closed. But this year its shares are the worst performers in the Nasdaq 100 Index of large non-financial companies listed on the exchange after plunging more than 70%. Peloton has also fallen more than any company in the S&P 500 Index of large US corporations.

The company was beset by a safety recall of its treadmills and a drop in traffic from online users as something resembling pre-pandemic life began to resume. As revenue growth sags and customers use its services less often, Peloton slashed its full-year sales forecast on Nov. 4 by as much as $1 billion. The company appears to be in something of a crunch, ramping up advertising to bring in new users at the same time that it offers discounts on the $2,000 price tag of its famed bike.

The pandemic could once again be good news for Peloton, if omicron makes people nervous about public spaces or results in government restrictions that close them. That could give the fancy exercise-equipment firm another chance to introduce its slick bikes and services to a captive audience.

But this time around, gyms have adapted by offering their own online classes and have rolled out hybrid physical- and virtual-fitness offerings. This underscores how the world has changed since March 2020 when the coronavirus ripped through the global economy: Many businesses that survived have evolved, and those survivors are probably more able to withstand renewed shutdowns and restrictions if those become necessary.

While that might not be great news for Peloton, it offers hope that commerce and business will, if required, be better able to withstand the pressures of a new Covid-19 disruption.