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Investors Fret Over Peloton’s (NASDAQ:PTON) Deal with Dick’s Sporting

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Peloton announced a partnership with Dick’s Sporting Goods to sell its fitness products at over 100 Dick’s retail stores. However, investors seem to be worried about the potential impact of this deal on the company’s margins.

In its latest move to boost sales, at-home fitness equipment maker Peloton Interactive (NASDAQ:PTON) announced a deal with Dick’s Sporting Goods (DKS). Under this partnership, Peloton’s bikes and other products will be sold through branded shops within more than 100 U.S. retail locations of Dick’s. Pursuant to this deal, which is expected to be rolled out in the holiday season, Peloton’s products will also be sold through Dick’s e-commerce channels.

Peloton stock fell 14.4% in Thursday’s regular trading in reaction to the news. Investors appeared to be concerned about the impact of this deal on Peloton’s already dismal margins as the company might lose some of its pricing power for using Dick’s retail platform.

After witnessing stellar growth rates during the COVID-19 lockdowns due to the closure of gyms, Peloton has been reporting weak sales since the reopening of the economy. Tough macro conditions are also hurting sales. Additionally, the company’s losses are mounting. Peloton has seen a notable management shake-up in recent times amid efforts to turnaround it’s business.  

In August, the company announced a partnership with Amazon (AMZN) to sell its connected-fitness equipment, clothing, and accessories on the e-commerce giant’s U.S. website. Prior to this deal, Peloton was selling its products through its direct-to-consumer, multi-channel sales platform, which included a website, showrooms, and sometimes a store-within-store concept.

Is PTON a Good Stock to Buy?

Wall Street is cautiously optimistic about Peloton stock. Consensus among analysts is a Moderate Buy rating based on 12 Buys, eight Holds, and two Sells. The average Peloton price target of $15.94 implies 126.1% upside potential from current levels. PTON stock has plunged 80% so far this year.

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