Peloton Interactive Inc. (PTON) emerged as a high-flyer stock during the pandemic, rocketing to unprecedented heights due to acute interest from retail investors active on social media platforms. The company benefitted from the fitness craze amid COVID-19 shutdowns and gym closures. However, the post-pandemic reopening of the economy has dampened the growth streak for the exercise equipment maker, with noticeable downturns in product sales and subscriptions.
In response, Peloton has recently unveiled a strategic rebranding effort consisting of additional app membership tiers, including a cost-free version, to recalibrate its business model.
Despite these adjustments, PTON experienced a significant drop following Wolfe Research LLC’s decision to downgrade the stock to a sell-equivalent rating, stating that its “path to growth doesn’t seem to exist.”
Wolfe Research analyst Zach Morrissey conveyed skepticism regarding the company’s prospective success, citing reservations about the demand for home fitness products and questioning the viability of PTON’s novel growth initiatives. Morrissey also raised concerns over the lack of clarity surrounding Peloton’s pathways to sustainable profitability and free cash flow.
Given the existing uncertainties regarding the company’s outlook, owning PTON stock can potentially be deemed a high-risk decision. As we delve deeper into various performance metrics, we will further highlight why caution may be prudent when considering investing in this stock.
Analyzing the Financial Ups and Downs of Peloton Interactive, Inc. (2010 - 2023)
The trailing-12-month net income of PTON has experienced significant fluctuations over the past few years. Key Highlights:
- On September 30, 2020, PTON’s net income stood at $47.40 million, which subsequently increased by nearly 3.5 times to hit $166.4 million on December 31, 2020.
- Over the first quarter of 2021, the income rose further, reaching a peak of $213.4 million on March 31.
- However, by the second quarter of 2021, PTONstarted reporting losses. The end of June 2021 saw a negative net income of -$189 million.
- This downward trend continued throughout the year, with increasingly large deficits witnessed quarter after quarter. On September 30, 2021, the net loss was -$634.2 million, and it drastically dropped to -$1.14 billion by the end of the year.
- March 31, 2022, saw a loss of -$1.89 billion.
- An unprecedented net income dip was recorded on June 30, 2022, with -$2.83 billion, moving to -$2.86 billion on September 30, 2022.
- Most recently, as of December 31, 2022, the net income stood at -$2.76 billion. By the end of the first quarter of 2023 (March), there’s a slight recovery with a decrease in loss to -$2.28 billion.
In terms of growth rate, computed from the first value to the last, there is a substantial decrease, transitioning from a profitable operation in late 2020 to significant losses by early 2023. Hence, PTON’s finances have been quite volatile, with a marked downward trend, especially since mid-2021. Highlighting the fact that the company’s financial health has suffered significantly in recent times.
PTON’s trailing-12-month revenue trend and fluctuations have been dynamic between September 2020 and March 2023.
- Starting from $2.36 billion in September 2020, there was a consistent increase, reaching its peak at $4.14 billion by December 2021. This represented a growth rate of approximately 75%.
- The first quarter of 2022 saw a slight decline in revenue to $3.84 billion. The decrease became more noticeable, with the revenue falling consistently over the next four quarters.
- As of the last reported data in March 2023, the revenue stood at $2.84 billion, marking a decrease of approximately 24% from its peak in December 2021, but still represents an increase of roughly 20% from the first value recorded in September 2020.
The overall upward trend from 2020 through 2021 and the subsequent downward trend from 2022 onwards suggest that PTON’s performance has varied over this period. Emphasizing recent data indicates that the revenue has been in a stage of decline from the start of 2022 to early 2023.
The gross margin of PTON demonstrated a distinctive downward trend between September 2020 to June 2022, with fluctuations of different magnitudes.
- In September 2020, the gross margin was at its peak at 45.0%, but over the next nine months, it fell steadily, reaching 40.3% in March 2021 and a further drop to 36.1% by June 2021.
- There was a slight decrease from September 2021 to December 2021, with gross margin falling from 34.1% to 30.0%.
- By the end of the first quarter of 2022, there was another significant fall in gross margin to 25.5%, continuing to its lowest of 19.2% by September 2022.
- Interestingly, the gross margin started to recover towards the end of 2022, slightly increasing to 19.9% by December 2022.
- The most recent data from March 2023 shows a rather positive trend, with the gross margin rebounding to 24.4%, signifying a recovery in overall margin performance.
Comparing the first value (45.0% - September 2020) with the last value (24.4% - March 2023) indicates a substantial reduction of around 20.6 percentage points. This signifies a strong contraction in gross margin over this period, despite the recent signs of marginal recovery.
The current ratio PTON has shown both an overarching trend and significant fluctuations over the analyzed period:
- From September 2020 to March 2023, the current ratio generally fluctuated between 2 and 2.7. It began at 2.36 in September 2020, reached its peak value of 2.74 in March 2021, and dropped to its least value of 1.96 in September 2021. By March 2023, it stood at 2.24.
- The most recent data from the last quarter (January to March 2023) shows a slight decline from 2.28 in December 2022 to the current value of 2.24.
There is a -5% difference in the current ratio from September 2020 to March 2023. This indicates a minor overall decline within the fluctuating movements. It’s important to closely monitor these trends and fluctuations to observe how the company’s liquidity position develops with time and any impacts this may have on its financial stability.
Rollercoaster Ride: Tracking PTON’s Share Price Trends - January to July 2023
PTON’s share price data demonstrate several notable trends over the examined period.
- From January 13, 2023 ($10.32), to February 10, 2023 ($15.22), the value experienced a marked increasing trend, resulting in a growth rate of around 47% over the month.
- However, a sharp decline occurred from February 10, 2023, with the price decreasing to $13.03 on February 24, 2023. This represents a roughly 14% decrease over two weeks.
- The price seemed to stabilize in early March, remaining around $13.02 to $13.06.
- March saw another significant drop in PTON’s share price. By March 24, the value had fallen to its then-lowest point at $9.55, a decrease of around 27% from the start of the month. There was a slight uptick at the end of March, bringing the price to $10.28.
- In April 2023, the price fluctuated without a clear directional trend, closing at $8.91 after reaching a high of $11.41 earlier in the month.
- The overall downward trend continued through May, with the share price falling to a new low of $7.13 by the end of the month.
- Finally, the prices climbed slightly throughout June, ending at $7.47, and then further increased to $8.23 by July 5, 2023.
In conclusion, although a brief surge happened from late January to early February, the overall trend for PTON shares between January and July 2023 has been a general decrease with a few intermittent periods of stability or slight growth. The severity of the trends suggests they are somewhat decelerating. Here is a chart of PTON’s price over the past 180 days.
Examining PTON’s POWR Ratings Over Six Months
PTON has an overall D rating, translating to a Sell in our POWR Ratings system. It is ranked #49 out of the 54 stocks in the Consumer Goods category. It also has an F grade for Stability and Sentiment and a D for Value.
The POWR Ratings of PTON have seen a varying performance in the Consumer Goods category of stocks over recent dates.
Below is a detailed chronological analysis: -
- In the first quarter of the year, specifically from January 7 to March 25, 2023, PTON had a weak rating of F. Its rank in category fluctuated between 57 and 51.
- On April 1, 2023, there was a slight improvement when PTON’s rating went up to D for a week but fell back to F the following week.
- The grade remained F until the last week of April. Starting May 6, 2023, the rating improved to D and has remained consistent at D since then.
- As for its rank in the category, there has been a steady yet slow decrease since the starting weeks of January 2023. However, it remains higher than 47, which suggests there is room for substantial improvement, considering lower values denote a superior rank. The latest value as of July 5, 2023, indicates that PTON’s rating is D, with a rank in the category of 49.
Stocks to Consider Instead of Peloton Interactive Inc. (PTON)
Other stocks in the Consumer Goods sector that may be worth considering are Ennis Inc. (EBF), KOSÉ Corporation (KSRYY), and Kimberly-Clark de México, S. A. B. de C. V. (KCDMY) -- they have better POWR Ratings.
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PTON shares were trading at $7.42 per share on Thursday morning, down $0.81 (-9.84%). Year-to-date, PTON has declined -6.55%, versus a 15.38% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.
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