The company’s shares plunged 20 percent on Thursday after announcing a production halt. While Peloton’s revenue growth has been slowing, it has seen its highest sales growth in more than a year. As a result, the company has decided to adjust its hiring plans to reduce costs. It will also overhaul its product development teams and showrooms. However, this decision is unlikely to benefit shareholders.

The news that Peloton is considering a production halt has caused shares to fall more than 12%. This has been the case for a few months. In November, the company reported that it was reducing its full-year guidance by $1 billion. Analysts have cited the company’s recent announcement of the closure of a US manufacturing plant. It is not clear whether the company needs the additional capacity at this point. On top of that, the company has hired McKinsey consultants to review its cost structure, which could result in store closures and job cuts.

Peloton Shares Dive on Report of Production Pause

The news is not a positive for the company, but it does signal the importance of its future prospects. Peloton has already increased its manufacturing capacity and will continue to lower its prices. While this could create a competitive disadvantage for competitors, the company is still generating significant revenue from subscriptions and ad-based sales. As a result, investors should find Peloton’s lower valuation attractive. Its shares started the year at a price-to-sales ratio of about twenty and are now trading at 5.6 times its forward revenue guidance.

While it is difficult to predict a recession, there are some bright spots for the fitness-minded company. The company’s IPO price of $29 has been hit by heightened competition and price sensitivity. The company announced a $420 million acquisition of Precor last month, adding a half-million square feet of production space in North Carolina. Meanwhile, subscribers are using their bikes less frequently. In the third quarter, the average monthly workout dropped from 26 to 16 according to a report released by Peloton.

As a result of the production pause, Peloton missed an opportunity to boost its profits in the last financial year. The company hired employees when its shares were trading between $150 and $160 and waited until the company reopened its factories before raising capital. This would have allowed Peloton to increase its valuation and diluted shareholders. Hence, the shares are now down by nearly 20% today.

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A report from CNBC says Peloton will temporarily halt production of its exercise machines, which it hopes will help it regain its former position. The stock is reportedly falling more than 27%, and it is now at a two-year low. The company also said the suspension of production is due to “significant reduction in demand globally”. As a result, the Tread treadmill is unlikely to be manufactured for six weeks.