Peloton Gives Gloomy Forecast in Sign Comeback Is Still Far Off
Comment of the Day

August 25 2022

Commentary by Eoin Treacy

Peloton Gives Gloomy Forecast in Sign Comeback Is Still Far Off

This article from Bloomberg may be of interest to subscribers. Here is a section:

The outlook follows a similarly dire fourth quarter, when sales plunged 28% to $678.7 million and the adjusted loss was $288.7 million. On a net basis, the loss was $1.2 billion -- about four times the size of the company’s loss a year earlier.

The numbers suggest that a turnaround plan under Chief Executive Officer Barry McCarthy still has a long way to go. He took the reins in February and slashed expenses – cutting thousands of jobs and shuttering operations -- but the company is facing sluggish demand and a buildup of inventory. On
Wednesday, Peloton announced plans to begin selling its bikes and accessories on Inc.’s site, aiming to broaden its distribution.

The Amazon news gave a boost to shares, but they remain down nearly 90% over the past year. After the company published its outlook on Thursday, the stock dropped 6.5% in premarket trading before markets opened in New York. 

Eoin Treacy's view

I was rather puzzled at Peloton’s strength yesterday. News they are about to start selling on Amazon was greeted with enthusiasm by investors. However, Amazon takes a fee from prime of anything between 30-40%. If there is not going to be a massive price disparity, Peloton will need to eat that cost.

That’s outside of the argument that sales are falling because unnecessary spending is taking a hit everywhere and people understand once the fad factor wears out, exercise equipment tends to go unused.
The share gave the gain back today and remains susceptible to further selling.

NVidia also came out with disappointing guidance today. The computer gaming sector is going through a difficult patch. It was considered recession proof because demand held up during the credit crisis. However, now the gaming sector has expanded onto mobile devices and is ubiquitous so it is much more attuned to regular consumer demand.
Nvidia continues to steady from the region of the 1000-day MA.


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