Why Peloton Stock Plummeted 27% in April
Shares of connected fitness company Peloton Interactive (NASDAQ: PTON) stock dropped 27% in April, according to data provided by S&P Global Market Intelligence. While there wasn’t any significant news in April, it was a continuation of a slide that’s been ongoing and was reinforced with uninspiring results released in February.
Things aren’t going well in Peloton land
Peloton rocketed to stardom early in the pandemic when fitness enthusiasts had to stay home. Affluent exercisers who could no longer access their gyms or run outdoors flocked to Peloton’s digitally enhanced machines, which provide a connection to like-minded fitness enthusiasts through live classes.
However, it made some mistakes in the aftermath. Mistakes or not, demand has trickled as the world and fitness centers are open again. Putting the internal and external factors together doesn’t make for a pretty picture for Peloton and its prospects.
The founder-CEO exited two years ago, and Netflix veteran Barry McCarthy took over. However, even though the company has attempted a varied array of ventures and initiatives, performance continues to be bleak.
Peloton announced McCarthy’s departure as CEO this morning, along with a 15% reduction in corporate headcount, or about 400 jobs. Peloton chairperson Karen Boone and Peloton director Chris Bruzzo will co-run the company while it searches for a new CEO.
It’s aiming for a complete reorganization, cutting down its showroom space and reinventing its marketing strategy. It’s anticipating its efforts will result in a reduction of annual run-rate expenses of at least $200 million by the end of fiscal 2025 and lead to consistent positive free-cash-flow generation.
The results continue to disappoint
Peloton announced fiscal third-quarter (ended March 31) results at the same time. Total revenue declined 3% year over year in the quarter, although subscription revenue increased 3%. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) turned positive at $5.8 million after an $18.7 million loss last year, and net loss improved from $275.9 million last year to $167.3 million this year. It generated $8.6 million in positive free cash flow after $55.3 million in negative cash flow last year.
Ending paid connected fitness subscriptions fell 1% from last year, and paid app subscriptions dropped 27%.
As of this writing, the market is reacting positively to the new developments. But the company is in a precarious position right now, and things could go both positively and negatively. Investors should sit on the sidelines until there’s greater stability.
Should you invest $1,000 in Peloton Interactive right now?
Before you buy stock in Peloton Interactive, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Peloton Interactive wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $529,390!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of April 30, 2024
Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix and Peloton Interactive. The Motley Fool has a disclosure policy.
Why Peloton Stock Plummeted 27% in April was originally published by The Motley Fool
