Mohit Oberoi
Peloton (NYSE: PTON) has seen its fortunes whipsaw over the last two years. The stock fell to a new 52-week low yesterday amid reports that its marketing head Dara Treseder has quit and would now join Autodesk.
Treseder is the latest top executive to quit the troubled home fitness company. Earlier this month only, John Foley quit as the company’s chairman. Foley, who is a co-founder of the company, had quit as the CEO earlier this year only amid sagging stock price.
Hisao Kushi, another Peloton co-founder also quit as the Chief Legal Officer but would continue in the position until October 3. PTON’s Chief Commercial Officer Kevin Cornils has also quit but the company does not intend to fill that position.
Peloton stock is down sharply this year and is among the worst performing names. It was also among the worst-performing stocks in 2021 and trades well below its IPO price. The company’s fortunes have nosedived as the economy has reopened which has led to a slowdown in demand for home fitness equipment.
In its fiscal fourth quarter of 2022, Peloton reported revenues of $678.7 million, down 28% from the corresponding quarter in the previous year. Its losses also widened and it posted a negative EBITDA of $288.7 million in the quarter.
Senior Executives Quit Peloton amid Restructuring
Peloton is trying to restructure the business under its new CEO Barry McCarthy. It has taken several steps to turn around the business. It scrapped the Ohio factory, where it was set to invest $400 million to manufacture products in the US. The company would now be selling the plant in order to raise cash.
Peloton has also exited the manufacturing business and has moved fully to third-party manufacturing. It has also opted for third-party logistics to reduce costs.
Peloton has also started selling its equipment on Amazon. Customers buying Peloton equipment on the site have the option to either opt for self-assembly or seek the help of an expert as an extra service. Currently, the company would not charge extra for the delivery and the assembly service.
PTON Now Also Sells Its Equipment on Amazon
Amazon has announced a second Prime Day of 2022 which would be held next month. The e-commerce giant listed Peloton as among the brands on which buyers can expect good deals during the event. Amazon stock has crashed amid the broader market turmoil but Wall Street is overwhelmingly bullish and most analyst rate Amazon stock as a buy or equivalent.
Peloton has made it clear multiple times that preserving cash was its top priority and is planning to become free cash flow positive in the back half of the 2023 fiscal year.
JPMorgan Finds Peloton Stock as a Buy after the Plunge
While PTON stock has plunged, many analysts continue to remain bullish and have maintained their buy rating on Peloton stock. JPMorgan is bullish on PTON as the company transitions from a fixed to a variable cost structure. Notably, while Peloton’s equipment sales are coming down, its subscription revenues are rising.
It posted subscription revenues of $383.1 million in the most recent quarter which was ahead of the $295.6 million that it got from product sales – it was the first time in the company’s history that its subscription revenues surpassed product sales.
Former stay-at-home winners like Peloton, Chegg, Teladoc Health, and Zoom Video Communications have been feeling the heat as the economies have reopened and these companies are finding it hard to repeat the stellar growth of 2021.
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This article was written for Business 2 Community by Mohit Oberoi.
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