Peloton Management Exodus sees Founders Foley & Kushi and CCO Cornils Exit in Pivotal Strategy Shift

Investing

Published: September 13, 2022 9:23 pm

On Monday afternoon, Peloton Interactive (US:PTON) grabbed headlines yet again…

This time from a company press release that announced the resignations of the groups Co-Founders John Foley and Hisao Kushi and Chief Commercial Officer Kevin Cornils.

The move comes after new CEO Barry McCarthy (appointed in early 2022) makes significant strategy changes to the business as it continues to report significant losses each quarter.

PTON’s investors have suffered immense losses of over 90% from the stock’s share price peak above $150 in early 2021 when Peloton’s market capitalization exploded above $50 billion. The boom came as GYM’s closed during the pandemic and which resulted in consumers shifting towards home training.

John Foley stepped down from his position as group CEO in February 2022 and has today announced that he will resign as the Chairman of Peloton on Monday. Foley had led the company for most of the group’s 10 year existence.

Foley will be succeeded by Karen Boone, a former Restoration Hardware executive who has been a board member of Peloton since 2019.

Hisao Kushi was currently serving as the groups Chief Legal Officer and will be replaced by Tammy Albarran who served as general counsel at Uber Technologies. Kushi has served in the position since 2015 and will step down from the role in early October.

In addition to the two founders leaving, Peloton’s Chief Commercial Officer (CCO) Kevin Cornils will be leaving the company with no replacement planned for the executive. Cornils worked on overseas expansions and programs that included bike rentals during his tenure.

John Foley provided the following comments as part of his statement in the press release,

“Now it is time for me to start a new professional chapter. I have passion for building companies and creating great teams, and I am excited to do that again in a new space. I am leaving the company in good hands: The Leadership Team with the support of the Board is going to take Peloton to the next level as a company, and I am happy to know our Members are going to continue to be surprised, delighted, engaged, and excited about everything that is in store”

According to the previous financial results reported by Peloton on August 25th, the group saw revenue fall -27.6% over the year to $678.7 million. Subscription revenue grew 36% over the year to $383.1 million while connected fitness products lagged as revenue fell -55% to $295.6 million. The sales figure underwhelmed street expectations which had forecasted PTON to generate around $683 million in revenue for the quarter.

For the final quarter, PTON generated negative adjusted EBITDA of -$288.7 million. This loss blew out +640% over the year and +49% when compared to the third quarter of FY22. Analysts were forecasting the group’s loss to improve from the third quarter with a consensus forecast of -$123 million.

In addition to the result, PTON’s management provided guidance for the first quarter of FY23. They expect revenue to fall to between $625-650 million, which was well below consensus forecasts above $750 million. Additionally, they forecast an adjusted EBITDA loss of between -$90-115 million which was much closer to the streets’ expectation of around -$90 million.

UBS analysts remain bearish with a ‘sell’ call and recently reduced their price target from $13 to $8 after the Q4 result disappointment. Analyst Arpine Kocharyan has become increasingly cautious about management’s ability to meet and potentially beat the $800 million cost cutting guidance and with a lower revenue run rate.

Alternatively, George Kelly from Roth Capital Partners reiterated his ‘buy’ call on the stock but reduced his price target from $25 to $15 following the result. Kelley noted that the Q4 results reflected the continued restructuring and demand challenges but he sees long-term upside as the company consolidates and grows its subscriptions business. However, he does believe PTON’s shares will remain range-bound until demand firms.

PTON has a consensus ‘overweight’ rating and $16 average target price.

Fintels ownership accumulation score of 10.31 is bearish on the stock, based on weaker than peer levels of institutional ownership growth. Peloton currently has 825 institutions on the register that own a total of 308.8 million shares or over 90% of the company’s float.

Some of these institutions include T Rowe Price, Baillie Gifford & Co, Dragoneer Investment Group and Darsana Capital Partners.

This article originally appeared on Fintel