Home exercise company Peleton Interactive (NASDAQ:PTON) is cutting 15% of its jobs, and CEO Barry McCarthy is stepping down.
Peleton said it lost $167 million, $1.44 per share, on revenue of $717.7 million during the most recent quarter, the third of its 2024 fiscal year. It ended the period with $795 million in cash.
Traders reacted favorably to the news, bidding PTON stock up 11% overnight. Peloton is due to open this morning at $3.58 per share, a market capitalization of $1.35 billion.
End of the Virtual Road
Peloton was a hot stock during the worst of the Covid-19 pandemic. In early 2021, it was trading at over $140 per share. But it has never recovered from the end of that year’s bull market. In fact, it has lost 90% of its value just since the start of 2022.
The company had about 8,000 employees in 2021 and 3,500 last June. This is the fifth round of 400 layoffs since June 2021.
McCarthy took over from founder John Foley in February 2022, as the stock was falling. He laid off manufacturing employees and focused on the company’s app, which leads users through workouts on treadmills and stationary bicycles.
But he was unable to do much about Peloton’s debt. At the end of March Peloton had $991 million in convertible notes outstanding and a $692 million term loan.
McCarthy was able to point to some success. Member numbers have stabilized at about 6.6 million, with churn falling to just 1.2% per month. Thus, the layoffs, combined with store closings, may result in positive cash flow.
Analysts have lost interest in the stock, however. Tipranks still lists five buyers, but there are two sellers and 21 in total. Bank of America put a “sell” rating out in February, but the stock is already below its $4/share target price.
Peloton Layoffs: What Happens Next?
PTON is now in penny stock territory and should be treated as a trade, not an investment. While Peloton may stabilize and may even make money one day, early investors will likely not be made whole.
On the date of publication, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
