Peloton, a beloved covid stock, has been on a warpath downward from its 52 week high it reached in December 2020 of $171.09. The stock has reached multiple new 52 week lows just this month and it looks like it can go even lower. It’s also noteworthy that earnings is February 8th.
Quickly scanning through various news articles, it is easy to find a litany of bad news:
Demand for the bike is down so halting production for two months (Feb & March)
Peloton will be adding additional delivery/setup fee for the bike ($250) and treadmill ($350)
Declining website visits
Potentially will be cutting jobs and closing stores after cost structure review
Leaked audio indicating a lay off of 41% of their sales and marketing staff
Previous earnings call was 11/4/2021 - they missed on both earnings (estimate -1.15 actual -1.25) and revenue (estimate 810.6 actual 805.2 mil).
Couple of noteworthy quotes from the call:
“As noted in our shareholder letter, we are reducing our guidance for fiscal year '22” - John Foley CEO
“While we continue to see a nearly 100% two-year growth CAGR in both traffic and unit sales in Q1 and into Q2, we’ve seen a greater-than-anticipated taper of our website traffic levels over the past two months and a slower-than-expected pickup in retail showroom traffic, both of which are important inputs into our forward-looking demand model. This reduction in traffic has added increased near-term uncertainty into our forecast.” - John Foley CEO
Planning to purchase PUTs this week or next.
Looking to start some dialogue on both the bull and bear side on this topic.
PTON to me is still trading above their pre covid numbers, and based on the same indicators we used last ER, they are still struggling. I will def be playing earnings on the puts side and think they have room to go to the low 20’s. Not entering this week but will grab puts a week or so out.
It does make me wonder about purchasing puts as the other workout brand known as Nautilus is also struggling, however it’s strange - as they also sell to both commercial business AND to home owners. Is it possible that PTON’s price for their earnings is already priced in?
check out their chart last earnings, as well as listen to the call/read the transcript. Should answer any questions about why they still have room to drop.
Work from home anything Is dying right now. The “mirror” at home workout system flopping was what dropped LULU’s guidance and earnings for that put play. This is great DD and I appreciate the write up.
I think I’m going to play this one too. That Business Insider article that just got posted about them planning to lay off 41% of staff is brutal. Looking for about a week before earnings.
It’s been pretty much on a constant downtrend for a while, just a random bounce probably. Could be a potential entry to play the run up to earnings? IV isn’t too jacked atm.
I don’t exactly know why PTON would exit its downtrend at this point in time especially with overall market conditions. I’m guessing it was just another spike on its decent to hell. With that being said I’m very bearish on the stock so I could be biased
They are paying the price for massively overcorrecting during the pandemic and supply chain issues. I think the layoff leak and news of a cost structure review are interpreted as bullish because it could a drastic enough change to break them out of this death spiral. I’m skeptical of this, but the market seems to have hopium on it. There are examples of layoffs causing a bump in stock prices for other companies.
I bought puts yesterday but stopped out today and am going to watch the next few days. I think there is still money to be made in pre-earnings phase on bearish movement, but we need to see if the overall market sentiment shifts towards a correction based on this week’s news.
I don’t think they’ll turn it around. I’m expecting a brutal earnings call sugar coated in optimism. You know, like WISH and RH. Hard to say how it’ll move after hours.
This is why I don’t recommend playing PTON now, it’s all priced in. If it has a run up to earnings then maybe, but IV would still be jacked. The only good idea I can think of is selling naked OTM calls to capitalize on IV but even then don’t do this unless you’re absolutely sure of what you’re doing. Selling naked calls is risky.
IV is jacked for sure. Still the production halt just gave the company and McKinsey the groundcover to fire more employees which have to be coming any day. Might drop the price more when the cuts are deeper than people expect. They are bleeding cash and I would think Street analysts are going to butcher them tonight/tomorrow.
PTON’s price has fallen a ton already so this might not be a good analogy, but Zillow (Z) announced that they were halting house buying, share prices fell, and then two weeks later, announced they were closing the business. So this could be the first of more bad news.
And if they are halting production for 2 months because “sales have softened,” they could fall more even though they have fallen 75% from their peak. GPRO for example fell 90%, until they could find their footing again. Unclear if PTON has that much runway as they are hemorrhaging money.
This is similar to my comments. I think there is more bad news coming. Unlike Zillow which shut down part of the business, this is all of PTON’s business. $8.6B market cap. Still has a way to drop I think.
I see some people are speculating on a buy-out and Apple has been named.
Apple is low cost production of high priced items with high margins, manufactured in huge numbers.
PTON is high-cost production, i think they even send someone to help you install their products? No margins and little scale. Don’t see this as an apple product.
Halting production is not a good sign. Also, Precor who Peloton bought in the last year has been on a decline for a while now.
I don’t think I’ve ever seen the number on how many people renew their subscription. I’m pretty sure they were selling the bike at a small profit and banking on subscriptions being how they made their money. When you buy a Peloton the first year is baked in the price of the bike, but how many people renew? If renewal is high it bodes well for them, if it is a low number, it is not a good sign at all.
