Peloton Stock Drops 90% as Company Fights for Survival

Peloton Interactive Inc. (NASDAQ: PTON) has fired a large number of people, including senior management and its longtime chief executive. Presumably, new management wanted to keep the executives who were left to help an already doomed turnaround of the bike and rowing machine corporation. Recently, one of the company’s most important people, Chief Marketing Officer Dara Treseder, left for Adobe, pushing the company’s stock lower. It is down 90% over the past year. Treseder saw the writing on the wall.
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New CEO Barry McCarthy replaced founder John Foley. Foley recently was pushed out as board chair. So far, results show that McCarthy has not done a better job.

Recently, Peloton announced that revenue fell 30% in the most recent quarter to $679 million. The company posted a loss of over $1.2 billion.
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McCarthy has taken Peloton through a series of cost-cutting measures. While they might improve margins, there is no reason to think they will improve the top line. One reason analysts think the company will not recover is that millions of people who worked out from home because of the COVID-19 pandemic have returned to public gyms. Owners have begun to sell their Peloton equipment online at large discounts, compared to what they cost new.
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Peloton decided to compete with its own customers with the launch of a used equipment sales business. This almost certainly will cannibalize the sale of new equipment. Once again, while this may improve Peloton’s margins, it likely will force the top line down.
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Another solution McCarthy created was selling a new, extremely expensive product: a rower priced at $3,195. It is a puzzle how a new, expensive piece of equipment will compete with a cascade of used Pelotons.

USA Today recently reported that the move from Peloton products to gym memberships has accelerated. No wonder Treseder left.