24/7 Insights

• Peloton Interactive Inc. (NASDAQ: PTON) has tried almost everything to get back on track.
• But rivals are gaining market share and customer demand is disappearing.

After announcing another bad quarter and firing its CEO, there might have been some hope that Peloton Interactive Inc. (NASDAQ: PTON) shares would rebound if just a little. That has not happened. Wall Street still thinks it has a broken model and that may not be fixable.

After a brief rally in early May when the board restructured Peloton, its shares started another march downward. The stock has been off 54% in the past year and 78% in the past two years.

Only with a chief executive officer able to regain sales for its exercise equipment, software, and subscription products can Peloton’s stock return to penny stock levels at $3.15 a share. Customer demand is disappearing, and the company’s rivals are gaining market share with less expensive products.

Getting Peloton Back on Track

Peloton raised $1.4 billion to buy back $800 million in convertible secured notes, which had pressured its need for cash. These were due in less than two years. It will offer another set of notes due in 2029. It will get a five-year $1 billion loan and a revolving credit line of $500 million. According to Bloomberg, “The loan is unrated and is being marketed to a broad range of investors, including direct lenders, private credit providers and loan investors that have the ability to buy debt not graded by rating firms, according to a different person with knowledge of the matter.” In this case, “unrated” could be read as “very risky.”

Revenue dropped 4% to $718 million in the most recent quarter. That was not the big problem. The company posted a loss of $173 million, up from $195 million in the previous quarter and $276 million in the same quarter of the previous year.

Peloton has tried almost everything to get back on track. It sells used versions of its equipment, which is a way to compete with itself. It offers its equipment at Dick’s Sporting Goods and on Amazon. People bought its machines during the pandemic while trapped at home. That period has been over for nearly two years.

Perhaps Peloton’s most significant challenge can be found at Amazon. Its bikes cost as much as $2,495 there. There are also over a dozen competing bikes that cost under $500. How many consumers will pay the premium? A bike bought at Peloton’s site can easily cost over $2,200,

Additionally, every major gym, and some smaller ones, have exercise bikes of their own.

Peloton products are “upmarket.” However, consumers don’t appear to want to buy upmarket products.

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