Why Peloton (PTON) Stock Is Trading Up Today

What Happened:

Shares of exercise equipment company Peloton (NASDAQ:PTON) jumped 18.2% in the morning session after the company reported second quarter earnings results. Peloton beat analysts' revenue and EPS expectations. The company is undergoing a turnaround, and it grew sales in the quarter compared to the prior year, a first in more than two years. While its full-year revenue guidance missed Wall Street's estimates, adjusted EBITDA guidance was better. Free cash flow was also positive, an improvement on the cash burn reported in the same period last year. Overall, this was a good and encouraging quarter for a company that has struggled mightily in the past few years.

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What is the market telling us:

Peloton’s shares are very volatile and over the last year have had 59 moves greater than 5%. But moves this big are very rare even for Peloton and that is indicating to us that this news had a significant impact on the market’s perception of the business. 

The biggest move we wrote about over the last year was 4 months ago, when the stock gained 20.9% following reports that private equity firms are considering a buyout of the company. According to sources, there were discussions about cutting Peloton's operating expenses to make a potential acquisition more attractive. 

On May 2, 2024, Peloton announced cost optimization initiatives to reduce annual run-rate expenses by more than $200m by the end of FY'25. The plan includes reducing its global headcount by approximately 15% (400 Peloton team members). Following the news, Barry McCarthy stepped down from his roles as CEO, President and Board Director, providing more of an opening for potential buyers as the board continues to search for his replacement.

Peloton is down 24.7% since the beginning of the year, and at $4.35 per share it is trading 37.8% below its 52-week high of $6.99 from August 2023. Investors who bought $1,000 worth of Peloton’s shares at the IPO in September 2019 would now be looking at an investment worth $170.16.

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