Peloton’s new CEO will face intense scrutiny when the company releases its results this week

Peloton’s new CEO will face intense scrutiny when the company releases its results this week

Peloton's new CEO will face intense scrutiny when the company releases its results this week

A woman walks past a Peloton store in Manhattan on May 05, 2021 in New York City.

John Smith | SEE press | Corbis News | Getty Images

Analysts and investors are eager to hear from Peloton CEO Barry McCarthy and have him articulate his vision for the company’s future. He will have the opportunity to appear on Wall Street on Tuesday.

The former Netflix and Spotify executive has been running the connected fitness equipment maker for about three months since taking on the role from the company’s co-founder John Foley. He took over as a slowdown in equipment sales and rampant spending weighed on Peloton’s profits.

Some of McCarthy’s efforts to bolster the company’s finances and regain investor confidence are already underway, as Peloton seeks new customers but also ways to make more money from its current user base. The company recently reduced the prices of its gear, including the Bike, Bike+ and Tread, in hopes of making the products more affordable for a wider audience. On June 1, it plans to increase the fee for a full-access monthly subscription, to $44 from $39.

Under McCarthy, Peloton has also tested a rental option in select US markets, where users can pay a monthly fee of between $60 and $100 for a rented bike or bike+, as well as access to its content library. ‘coaching. It is still unclear whether this option could be rolled out nationwide.

“With a new CEO, no clear strategy yet, and the fundamental value proposition in question, there is a lot of uncertainty about what will happen next with Peloton,” Bernstein analyst Aneesha Sherman wrote in a note. to customers.

Peloton is expected to report a fiscal third-quarter loss of 83 cents a share on Tuesday on revenue of $972.9 million, according to an analyst survey compiled by Refinitiv. That compares to a loss of 3 cents per share on revenue of $1.26 billion a year ago.

Here’s what Wall Street will be watching when Peloton releases its results.

Cost Reduction Updates

McCarthy knows he needs to cut costs in order to keep the business afloat. The jury is still out on whether Peloton’s plans will go far enough.

About three months ago, the New York-based company announced a massive overhaul of its cost structure that included cutting about 2,800 jobs. Peloton also said it would end development of Peloton Output Park, the $400 million plant it was building in Ohio.

In total, Peloton’s plans would reduce annual costs by about $800 million and capital expenditures by about $150 million this year.

Activist Blackwells Capital argued that these cuts would not be enough. The firm, which called on Peloton in late January to fire Foley, continues to push for the maker of connected fitness equipment to sell itself to a company like Amazon, Google or Netflix.

MKM Partners managing director Rohit Kulkarni said he expects Peloton to review its cost structure this week. The company will likely need to take additional and “somewhat painful but fiscally prudent” cost-cutting measures, he said.

“How high can variable marketing spend go without having a significant long-term brand impact?” Kulkarni wrote in a note to clients. “Is Peloton planning to close any stores or delay capital investments such as production studios and factories?”

Kulkarni also said he would seek out Peloton to detail early consumer reactions to recent price cuts and impending subscription fee hikes.

Peloton previously said it doesn’t expect to be profitable, based on adjusted core earnings, until fiscal 2023.

Subscriber Growth

Peloton’s forecast for subscriber growth will be the focus on Tuesday, analysts said. This will allow Wall Street to gauge post-Covid post-pandemic demand for Peloton’s fitness equipment and content.

As of December 31, Peloton had 2.77 million fitness-connected subscribers, who are people who both own some of the company’s equipment and pay a monthly fee to access its workout classes. It has over 6.6 total members, including people who pay for a less expensive digital-only subscription.

Peloton previously said it expected to end its third fiscal quarter with 2.93 million Connected Fitness subscribers.

UBS analyst Arpine Kocharyan said in a client note that he would be looking for Peloton’s subscriber growth targets but also, just as importantly, any signs that current users might drop their memberships.

Peloton’s Connected Fitness average monthly churn of 0.79% as of December 31 is a metric that analysts and investors can track just that. The lower the churn, the better the news for Peloton because it means people are still sticking around and paying for the content.

“What will matter most is management’s feedback on the new pricing strategy, the cost of customer acquisition and the impact on churn rates,” Kocharyan said.

The strategic rationale for a potential deal involving Peloton and a suitor also remains a key debate among investors, he added.

Peloton could become a more attractive takeover target if its shares continue to fall. The stock hit an all-time low of $14.14 on Monday.

The sale came after the Wall Street Journal reported Thursday that Peloton was targeting potential investors, including industry players and private equity firms, to take a stake in its company of around 15% to 20%. %. Peloton declined to comment on the report.

#Pelotons #CEO #face #intense #scrutiny #company #releases #results #week

Tags: , , , , , , , , , , , , , , , , , , ,

Leave a Reply

Your email address will not be published.