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Peloton has one massive challenge other than a new activist investor: analyst

·Anchor, Editor-at-Large
·2-min read

Peloton (PTON) would be wise to realize it's no longer a hot growing tech company and adjust its business accordingly, says one analyst who covers the company.

"I think the challenge for the management team is that they need to really pivot from being a hyper growth company to now where they are, not in that part of the S Curve," said Needham analyst Bernie McTernan on Yahoo Finance Live. McTernan contends that with growth slowing, Peloton needs to get expenses under control since they have "ballooned."

Adds McTernan, "The transition for being a growth stock to a value one is never easy."

That much is for sure in the case of Peloton.

In a scathing new letter released on Monday, activist Blackwells Capital — which a source tells Yahoo Finance has amassed a less than 5% stake in the company — demanded Chairman, founder and CEO John Foley be immediately fired.

"Mr. Foley must be held accountable for his repeated failures to effectively lead Peloton," Blackwells Chief Investment Officer Jason Aintabi wrote in the letter. Aintabi lists a host of grievances with Foley, ranging from putting his wife in a key operational role at the company (apparel leader) to mishandling a safety recall for a treadmill.

Peloton declined to comment to Yahoo Finance about the letter.

Blackwells contends Peloton should put itself up for sale, highlighting Apple, Nike, Sony and Disney as potential suitors.

Peloton shares finished Monday's session up 9.7%.

The activist investor arrives after a material plunge (again) in Peloton's stock.

Shares of Peloton crashed 24% last Thursday after a CNBC report that the struggling fitness company would temporarily halt production of its bikes and treadmills due to sluggish consumer demand. The company will reportedly stop producing its bikes for two months and treadmills for six weeks.

Peloton refuted the report, saying it hasn't halted all production. It also pre-announced quarterly results, which showed a miss on the number of subscribers added.

The company's stock is now down 17% in January and lower by 82% in the past year, pressured by several quarters of sharply slowing growth and elevated losses.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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