Peloton Stock Is Falling Off a Cliff After Subpar Earnings Report

The Peloton at-home workout craze isn't over, but shareholders are veering away from their bullish behavior. Peloton (NASDAQ:PTON) stock has plummeted following a subpar earnings report that puts the company's long-term sustainability in question.

Why did PTON stock fall off a cliff on Nov. 5 and will the company be able to make up for such strong losses?

Despite being known for stationary exercise equipment, the fast-moving Peloton has managed to run into a wall. PTON stock fell 33.5 percent in the first 1.5 hours of trading on Nov. 5. The overnight sell-off occurred during a post-market-close earnings report that shows Peloton in a compromising fiscal position.

PTON stock is down 60.48 percent YTD with about a third of those losses coming in the after-hours session on Nov. 4.

PTON stock has recovered a mild 1.25 percent since the market open, but investors don't seem enthusiastic to jump back into the holding.

In Peloton's earnings report for the first quarter of fiscal 2022, the at-home workout company cut its annual sales forecast by a major $1 billion. The move caused more than four stock analyst firms to downgrade PTON.

In fiscal 2021, Peloton's revenue grew a mild 6 percent over the previous year. Bike and treadmill sales fell 17 percent. Peloton's usership from existing customers shrank YoY with subscribers completing an average of 16.6 workouts per month during the quarter compared to 20.7 in the same period the year before.

During the earnings call, Peloton CEO John Foley told shareholders, "From forecasting consumer demands to accurately predicting logistics costs, our teams have never seen a more complex operating environment in which to guide our expected results this year."

Peloton was one of the golden stocks amid the COVID-19 pandemic. With gyms and offices closed, Americans used the company's treadmills and bikes with subscription-based classes to work out at home.

As gyms reopen in 2021, PTON stock is struggling to keep pace with former shareholder growth expectations.

PTON highlights the risk of growth stocks. While individual stocks might thrive during certain economic cycles (or during specific eras of industry growth), those same stocks can falter in a changing world. The growth versus value stock debate doesn't have a clear winner, much like the nature vs. nurture debate.

Still, growth stocks have the pro of big gains (PTON stock grew nearly 400 percent in 2020) and the con of potentially not being sustainable. For people who bought in at the top, the struggle for a company to retain relevance feels mountainous.

Analysts are torn about PTON's long-term capacity. The outcome depends on Peloton's ability to expand its offerings as needed. In the meantime, the stock—currently priced at $57.16—still has a 63 percent long-term upside on Tipranks despite numerous downgrades. As the customers who do order from Peloton wait for their products in a widespread transit backup, PTON stock will continue moving in one direction or another.