Peloton Still Has No Future

24/7 Wall St. Insights

• Peloton Interactive Inc. (NASDAQ: PTON) shares surged after its earnings beat.
• However, the company still lacks a way forward toward major revenue growth and profits.
• Also: Dividend legends to hold forever.

Peloton Interactive Inc. (NASDAQ: PTON) released barely good earnings for the first time in years. Its shares rallied but are still down 82% over five years. The truth is that Peloton’s products are too expensive, it has too much competition, and it remains very small in terms of revenue.

Bloomberg reported, “Peloton Interactive Inc. shares surged the most ever after the fitness company reported earnings that beat analysts’ estimates, signaling that turnaround efforts are starting to bear fruit.” However, its revenue rose only 0.2% year over year to $644 million. The company posted a loss of $30 million, compared to a loss of $211 million in the same quarter a year ago. A loss is a loss. Until Peloton can prove its losses have turned to profits, there is little to cheer.

Members, perhaps the primary metric for Peloton, dropped 2% to 6.4 million. Once again, bad news is bad news. Connected fitness product revenue dropped 4%. One of the headlines of the earnings release was about its sales to businesses. The primary example of this was a new agreement with YMCA in Chicago.

Finally, guidance for the next quarter was particularly weak. Peloton continues to lack a way forward toward major revenue growth and profits.

The company will not be turned around for at least one major reason. It has too much competition with lower prices. Below the Peloton equipment products at Amazon (which Peloton paid for, so it does not show how Amazon would have listed it under normal circumstances) are several products that get very good reviews from Amazon users. These include products from Merach, Vanswe, Wenoker, and Yosuda. The Peloton bike for sale costs $2,495. The others are under $300.

Is Peloton equipment better than its competition? If so, it is not better enough to fuel any growth.

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