The U.S. stock market has remained under pressure so far this year amid heightened inflation, aggressive interest rate increases, and slashed growth estimates. Earlier this month, the U.S. consumer sentiment slid to its lowest level in 11 years. Furthermore, the University of Michigan's consumer sentiment index tumbled 9.4% to 59.1 earlier this month. This indicates a potential downtrend in aggregate demand.
Exercise equipment and related fitness stocks have been slumping lately, as evidenced by the Global X Health & Wellness Thematic ETF’s (BFIT) 24.7% decline year-to-date. Also, as consumer spending slows amid a potential increase in unemployment, the demand for exercise and fitness equipment will likely decline in the near term.
Given their dim growth prospects, fundamentally weak exercise equipment stocks Nautilus, Inc. (NLS) and Peloton Interactive, Inc. (PTON) could witness a further pullback in the near term and, therefore, we think are best avoided now.
Nautilus, Inc. (NLS)
Fitness solutions company NLS in Vancouver, Wash., designs, develops, sources, and markets cardio and strength fitness products and accessories for consumer and commercial use in the United States, Canada, and internationally. The company operates in two segments–Direct and Retail.
On May 24, 2022, Truist analyst Michael Swartz cut NLS’ price target to $5 from $15.
NLS’ net sales decreased 41.9% year-over-year to $119.72 million for the fourth quarter, ended March 31, 2022. Its net loss came in at $18.21 million, compared to $30.40 million in net income in the year-ago period. Also, its loss per share was $0.58, compared to an EPS of $0.93 in the prior-year period.
NLS’ revenue is expected to decline 31.7% to $402.88 million in 2023. Its EPS is estimated to decrease by 77.8% in the same period. Furthermore, its EPS is expected to remain negative in 2023 and 2024. Over the past year, NLS has declined 88% in price to close yesterday’s trading session at $2.20.
NLS’ POWR Ratings reflect its poor prospects. It has an overall D rating, which equates to a Sell in our POWR Ratings system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
The stock has an F grade for Sentiment and a D grade for Growth, Stability, and Quality. Click here to access the additional POWR Ratings for NLS (Value and Momentum). NLS is ranked #34 of 37 stocks in the Athletics & Recreation industry.
Peloton Interactive, Inc. (PTON)
PTON in New York City provides interactive fitness products in North America and internationally. It offers connected fitness products and on-demand classes under the Peloton Bike, Peloton Bike+, Peloton Tread, and Peloton Tread+ names. The company also provides related fitness subscriptions and has around 5.90 million members.
PTON’s total revenue decreased 23.6% year-over-year to $964.30 million for the third quarter, ended March 31, 2022. Its net loss came in at $757.10 million compared to an $8.60 million loss in the year-ago period, while its loss per share was $2.27 compared to a $0.03 loss per share in the previous period.
PTON’s revenue is expected to decrease 9.8% to $3.63 billion in 2022. Its EPS is also estimated to decline by 1,650% in 2022. In addition, its EPS is estimated to remain negative in 2022 and 2023. Over the past year, the stock has declined 87.1% in price to close yesterday’s session at $14.51.
PTON has an overall F grade, which equates to a Strong Sell in our POWR Ratings system.
It has an F grade for Stability, Sentiment, and Quality and a D grade for Value. Click here to access all the PTON ratings (Growth and Momentum). PTON is ranked last among of 61 stocks in the D-rated Consumer Goods industry.
NLS shares were trading at $2.10 per share on Tuesday afternoon, down $0.10 (-4.55%). Year-to-date, NLS has declined -65.74%, versus a -12.79% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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