PTON Stock Alert: Why Peloton Stock Is Falling Today

Platoon (NASDAQ:PTON) stock is making a rather surprising move down today. At the time of writing, PTON stock is down more than 4%, despite the company announcing a rather intriguing partnership with Google and parent Fitbit. Alphabet (NASDAQ:GoogleNASDAQ:GOOGLE) to bring Peloton classes to Fitbit smartwatches.

This partnership aims to improve the utility that Fitbit watches provide to users. Along with a number of other upgrades Alphabet announced during this week’s Google event, giving users access to Peloton classes on their watches is certainly intriguing.

One would think PTON stock would rise on such an announcement, given the reach Fitbits has in the fitness community. Let’s see why this is clearly not the case today.

PTON shares tumble on key partnership announcement

In my view, the key issue the market seems to be pricing in with this product collaboration seems to be the perception that Peloton’s days as a high-margin maker of training gear and fitness products are over.

Indeed, the company has been losing money on this business for some time. Supply chain issues during the pandemic (combined with incredible demand) led to overproduction of many of the company’s core products and eventual price cuts, which hurt margins.

The company’s subscription business for its online courses has seen some growth lately. But the question of whether Peloton can exist on its own is one that many have been asking for some time.

While this partnership should improve the company’s reach and generate a likely increase in memberships for its classes, it’s also possible that users will move further away from ordering Peloton-branded merchandise. If that’s the case, Peloton could cannibalize its own sales to some degree.

And then there’s the question of whether this partnership was the right one for the company. There are other smart watch manufacturers in the market, esp Apple (NASDAQ:AAPL) — who may or may not have collaborated on such a concept. For now, the market seems to think most of the news is bad news for Peloton. Good or bad, that seems to be the way things are now.

At the time of publication, Chris MacDonald did not hold (either directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

At the time of publication, the responsible editor had (either directly or indirectly) no position in the securities mentioned in this article.