Peloton Finally Did Something It Hasn’t Done In Years

Peloton shares rose substantially on Thursday after the firm reported its first sales increase in more than two years.

The home fitness company’s sales were $644 million, up 0.2% from the previous year, and its stock rose more than 35%.

That may not appear to be a significant increase in sales, but after years of losses, analysts believe it may indicate that turnaround efforts are beginning to bear fruit. Sales increased at the beginning of the pandemic, but subsequently tapered off when individuals returned to work and abandoned their new home exercise equipment.

Peloton Finally Did Something It Hasn’t Done In Years

Peloton announced cost-cutting plans in May, including the layoff of 15% of its workers and the departure of previous CEO Barry McCarthy.

During Peloton’s earnings call on Thursday, Chief Financial Officer Liz Coddington announced that the firm would reduce expenditure on promotions and marketing, indicating a shift in focus from growth to profitability.

According to analysts, Peloton’s best course of action is to follow the game plan.

“Peloton has nearly three million subscribers who pay $44 per month to use a piece of machinery in their own home at a very healthy profit, which is incredibly impressive,” said Simeon Siegel, managing director and senior retail analyst at BMO Capital Markets. “The best thing the company can do is focus on making more money as opposed to making more noise and chasing new customers.”

Peloton, which was once one of the brightest stars of the epidemic, has had a rough ride over the last nine quarters. Lockdown caused gyms to close and kept everyone at home. The stock rose about 400% in the 12 months preceding its all-time high of $167.42 in January 2021, but has since fallen.

Widespread recalls and failed attempts, such as selling bikes in college colors and rebuilding its fitness program with a free tier, have harmed the company’s reputation and alienated investors. Earlier this year, stock prices fell to an all-time low of $3.

Peloton Finally Did Something It Hasn’t Done In Years

Even as the firm reports a drop in paid subscriptions for the first time (from slightly more than 3 million last quarter to roughly 2.98 million), Siegel says he still sees a path forward for Peloton.

“Peloton’s best offence is a formidable and compelling defence. They need to safeguard existing users because they generate a lot of money, but that means abandoning their focus on acquiring new ones,” he said. “If they do that, I believe today’s protest will be only the beginning. If they don’t, we’ll be dealing with a head fake.”

SOURCE | CNN