The Peloton (PTON) Plunge Continues, Is There Any Hope?

Trade PTON Stock Your Capital Is At Risk
Ollie Martin
Updated: 10 May 2022

Key points:

  • Peloton continues to slip on poor earnings and an equally weak outlook
  • Earnings were pegged at a loss of $2.27, way past the $0.83 consensus
  • Will a $750M loan agreement aid the restructuring of the business enough to welcome back buyers?

Just when you thought Peloton had weathered the worst; an expected lackluster Q1 report plunges the stock a further 25%. This wasn’t exactly rocket science for investors, the pandemic favorite has continued to slip in popularity since stay-at-home habits have dwindled. Backed with an unalluring product pipeline and swathes of sellers, Peloton might well be doomed. 

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PTON shares now sit around 50% below the company’s initial IPO price, an extraordinary 600% down from all time high’s in January 2021. If the current premarket losses are sustained throughout the Tuesday session, it will slash more than $1B off the company’s fading market cap.

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The company’s earnings were pegged at a loss of $2.27, way over the modest $0.83 expected by the Street. Revenue also missed expectations, coming in at $964.3M against the $972.9M expected. The wider than expected loss demonstrated that the decline in demand still has some way to go, with sales slipping and the costly process of inventories building up in warehouses. 

If it wasn’t bearish enough, the company offered an equally weak outlook on the basis of – you guessed it – softer demand. In a desperate bid to claw back revenue, the company is planning on hiking planned subscription prices, yet it is equally likely that the process will repel current users; another thorn in the wilting crown of Peloton. 

In what Peloton CEO Barry McCarthy defines as “thinly capitalized”; Peloton is strapped for cash. That hasn’t stopped the cogs whirring in management though, and a binding $750M loan agreement with J.P Morgan and Goldman Sachs earlier this week should be an indicator of plans to rebuild the company.

Although the expansion of subscription revenue is a centerpiece of the strategy, the move towards third-party retailers will likely aid wider sales growth; a needed move away from the company’s self-revolving branding. What’s in store for Peloton over the course of the next year? We can’t be sure. Perhaps increased capital will allow the company to explore other avenues of revenue, but whatever happens, things need to change…and quickly.

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