Peloton has new management and a reboot. As a result, the shares rose by 25%
Peloton Interactive (PTON) has published three press releases at once, announcing changes in the company:
- A new CEO
- A reduction of 20% of the staff
- Restructuring of business processes
As a result, peloton shares are rising after a year of decline.
Market analysts accused CEO John Foley of a strategic mistake: he did not consider that the increased demand for simulators could be temporary and began spending money on his delivery service and developed plans to build his factory worth $ 400 million.
Peloton shares have fallen by 74.8% over the past 12 months. Monday’s jump in growth was only due to rumors about a potential purchase of Peloton by Apple (AAPL) or another technology giant.
However, Peloton’s reports on Tuesday give some hope that the company may return to profitability. Firstly, Barry McCarthy replaces Foley as CEO and will join the board of directors. McCarthy previously served as CFO of Spotify (SPOTIFY) and Netflix (NFLX) and enthusiastically received market analysts.
Secondly, Peloton has announced a comprehensive business reboot. The new management of the company announced:
- Termination of plans to build your factory;
- Reducing own warehouses and delivery groups, instead of expanding commercial agreements with third-party logistics service providers;
- The Peloton will cut approximately 2,800 employees worldwide (about 20% of the staff).
- I am reviewing costs and drawing up a plan to stimulate sales growth, profitability, and free cash flow.
With the report for the 2nd quarter of fiscal 2022, Peloton management forecasts the 3rd quarter and the entire fiscal year.
At the end of the 3rd quarter, the company expects:
- Approximately 2.93 million Connected Fitness subscriptions (worth $39 for people who own one of its exercise machines) compared to 2.77 million in Q2.
- Total revenue will decrease from $950 million to $1 billion. Quarterly revenue and profit statistics on the Peloton reports page.
- The margin will decrease to about 23%
- EBITDA loss (before interest, taxes, depreciation, and amortization) will decrease to a range from -$140 million to -$125 million.
Peloton’s audience is not limited only to users who have bought simulators. Subscription, which includes all users of online fitness classes Connected Fitness Workouts in the second quarter increased by 26% to 123.2 million.
Updated full Peloton forecast for the fiscal year 2022:
- Approximately 3.0 million subscriptions to Connected Fitness
- Total revenue of $3.7 billion. Up to $3.8 billion.
- The margin will be around 28%
- EBITDA loss from -$675 million to -$625 million.
News of Peloton’s new leadership and reorganization with enthusiasm on Wall Street and the stock rose 25.3% at the close of trading on Tuesday.
In the coming months, the new management will have to convince investors and market analysts that the company can achieve a profitable business model for the long term. Analysts see the main problems of Peloton in decline in demand for its simulators, which account for 70-80% of total revenue, low margins, as well as high costs for sales incentives and marketing – more than 40% of revenue.
