Peloton Shares Plunge As CEO Warns Fitness Company Is ‘Thinly Capitalized’

Peloton shares fell nearly 10% Tuesday, following dismal quarterly earnings, which showed that the at-home gym company continues to lose money at an alarming rate. Barry McCarthy, the newly appointed CEO of Peloton, warned that it would take time to turn the company around.

Peloton shares were once a stock that was a darling of pandemic stocks. Now they are at all-time lows.

Key facts

Peloton stock was trading at $12 per share, which is close to record lows as Tuesday morning.

The at-home fitness equipment manufacturer is experiencing lower customer demand after the end of pandemic safety precautions. and reported a loss of $757M on March 31. This compares to an $8.6 million quarterly loss a year ago.

Peloton’s revenue also fell short of expectations. It dropped 15% to $964 million, marking the first year-over-year sales drop since its public listing in 2019.

McCarthy said that Peloton ended the quarter with $879 million in cash. This is a decrease of $1.1 billion from a year ago.

McCarthy stated that sales are slowing, and the company has a large inventory, even though it slashed prices last month. This has cost McCarthy an “incredible amount of money, more than we expected.”

Peloton has added 195,000 subscribers, less than half of the number added in the same period last year. Management also expects sales to be $700 million this quarter, well below the $800 million analysts expected.

Unexpected Fact:

Peloton’s stock has fallen 64% in 2022. It is roughly 90% below its peak in late 2020, when it experienced an increase in business during pandemic lockdowns.

What to Watch Out For:

McCarthy stated that Peloton borrowed $750 million to shore up its balance sheet in a five year debt agreement with JPMorgan Chase and Goldman Sachs. Although the loan agreement will keep the company in business and allow for operations to continue, McCarthy indicated that Peloton may require additional financing.

Important Quote:

McCarthy warned that “turnarounds are hard work” in a letter to shareholders and cautioned that it would take some time before Peloton recovers. McCarthy remains optimistic that the company will return to positive cash flow by fiscal 2023. However, he stated that the new $750 million loans will allow the company to have “plenty of capital.”

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Adam Collins
Adam writes about technology, business and economics. With master's degree in Economics, he's presented six papers in international conferences. As a solivagant in the constant state of fernweh, curiosity is the main weapon in his arsenal.

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