Peloton (PTON) continues to get beatdown

Well that happened fast. The IV needs to cool off before I consider a buy to open, and it’s now possible that earnings is fully priced in.

The GPRO analogy is excellent as this is another single-product hardware company. Although GPRO never managed a noteworthy pivot to subscription services, while PTON gets a higher portion of revenue from subs.

They still have a good product and good subscriber base. They’re just bloated. The US-based manufacturing investment seems like a costly overcorrection to short-term supply chain issues, in my opinion. All signs are now pointing towards making the company lose enough weight to be attractive for acquisition. Just don’t know where the bottom will be yet.

This graphic summarizes subscribers through Nov 2021 (the period they report as Q1 2022).

This is old data, but through 2020 subscriber retention was good.

tl;dr I’m looking for intraday put scalping once the IV cools off. Long-term, post earnings, I think it will be bullish at this price level.

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Aren’t deep ITM puts an option here for people who believe in the bear thesis but are worried about IV? Not sure LEAPs still works as an acronym when it’s for puts haha

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Peloton went ahead and released Q2 prelim earnings tonight to try and save face.

https://www.bloomberg.com/news/articles/2022-01-20/peloton-vows-to-slash-costs-as-it-posts-tepid-quarterly-results?utm_source=google&utm_medium=bd&cmpId=google

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Posting some info on the press release that PTON released about their quarter ended Dec. It all seems to show that they made or were close to the expected numbers. This is all spin on the future. Dec quarter is the biggest quarter for consumer product companies (they are not a SaaS tech company even though they position as one and get the valuation). They talk about right sizing the company relative to demand and it will refelect cost adjustments to expected revenue, but they won’t see if for some time. They stopped production because their pipeline/demand is really low, but they can’t just layoff people in NY (where they are headquartered) and CA. My company does a ton of acquisitions and we have to give 60 days notice to any NY employee where we reduce the office headcount by 50. There are similar laws in CA. PTON has over 3000 employees and the news says they are going to cut really deep. If they have employees they want to layoff in Europe, good luck. They won’t see any real cash savings until April. They are screwed with getting their cash burn down in the near term. Ken Chen suggested I post this. They are going to eat through a ton of cash with severance and how long they will need to hold these employees. It is pretty dire in my opinion.

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CEO trying to do damage control from today.
“Rumors that we are halting all production of bikes and Treads are false”
Peloton makes the bike/tread and bike+/tread+ so believe they may be halting some of it.
https://www.onepeloton.com/press/articles/a-note-from-john-foley-co-founder-and-ceo

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Great DD and comments, Thank you. After looking into it I would subscribe to the “first bad news of many” especially if you believe in a 2022 bear macroeconomic trend.

Their financials are scary, the key points I saw were:
1: Trending net income, @ -376m last reported.
ER (Outpacing previous qt since Q121)
2: Trending cash flow: (-2.2b last 3 qts.
combined, -556m last qt)
3: Inventory: First, this is an asset line item, but only if you can sell them. Their Inventory has grown qt over qt since Q121 to 1.3b vs 522m Q121. I would assume some of this in anticipation of the holidays, but if Q421 is underwhelming this really becomes a problem.

I believe financials tell a story and this looks like a company that struggled with winds in their sails (Home workout Covid surge and the surge of discretionary spending) IMO If the market trend turns, PTON would be the first wave of companies to feel it, as they are Higher end items that people don’t need.

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The CEO denied it for now but I wouldn’t be surprised if this all gets confirmed with their guidance. They may try to sugar coat it and say they’re downscaling so they can capture a niche market, but I wouldn’t be surprised if this get delisted/acquired by a tech company this year.

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https://www.bloomberg.com/news/newsletters/2022-01-30/will-apple-aapl-buy-peloton-probably-not-kz1dkcm7

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I am still holding on to my PTON puts expecting it to drop further as we get closer to earnings. Never was a fan of the company as it’s just a bike with a giant ipad slapped on it. It was talks of PTON getting acquired by a bigger company that changed my plan of holding through earnings to just selling day of earnings though I might do a cheap lotto play after reading the article that @MD_Retribution sent