Investors Keep Tabs On Peloton Stock Amid Buyout Buzz

Key Takeaways:

• Peloton CEO John Foley is stepping down
• Peloton stock has surged amid rumors of Apple and Amazon buying it
• Investors are keeping eyes on Peloton stock as the company reshifts priorities

Investors are eyeing Peloton stock after chief executive officer, John Foley, announced on Tuesday that he’d be stepping down and assuming the position of executive chair. The exercise equipment and media company reported that Spotify chief financial officer, Barry McCarthy, is replacing Foley amidst moves to internally restructure and cut costs. And, in doing so, it’ll be dropping nearly 2,800 jobs across the corporate, warehouse and delivery sectors.

William Lynch, president of the fitness and streaming company, has also transitioned to a non-executive director on the Board as McCarthy takes over his position, as well. The switch took effect on February 9, 2022. 

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“Since founding Peloton a decade ago, we’ve grown this brand to engage and motivate a loyal community of more than 6.6 million members,” Foley said in a statement. “I’m incredibly proud to have worked with such talented teammates over the years who have helped me build Peloton into what it is today, and I’m confident that Barry is the right leader to take the company into its next phase of growth.”

Foley adds that Barry is “recognized as an expert in running subscription business models” and notes his previous successes helping “category-leading digital streaming companies” take business to the next level.

McCarthy has held senior leadership roles at both Spotify (2015 to 2020) and Netflix (1999 to 2010), and he is a longterm advisor and board member across a gamut of technology companies, like Chegg, Eventbrite, Instacart, MSD Acquisition Corp, Pandora, and Rent the Runway. He was also a consultant at Technology Crossover Ventures, which has invested over $10 billion in both public and private technologies companies.

A pioneer in connected, technology-enabled fitness, Peloton founded the first-of-its-kind subscription platform that marries equipment with proprietary networked software and streamed fitness content. Members access its immersive instructor-led boutique classes across a wealth of platforms, including the Peloton Bike, Tread, Bike+, and app. 

However, despite all of the innovation, it hasn’t necessarily been smooth sailing for Peloton, which has seen its fair share of struggle. While Peloton stock skyrocketed more than 400 percent in the early days of the COVID-19 pandemic (as ever more people started working out at home), the company’s financial performance has been questioned over the last year.

On Monday, Peloton reported a quarterly net loss of a cool $439 million, and it recently announced that it’d be abandoning its plans to construct a $400 million factory in Ohio as demand decreases. Shares surged again on Monday following reports that tech giants like Apple and Amazon, among others, may make moves to acquire the company—but, ultimately, the stock has sunk nearly 80 percent since its high in late 2020. (Never mind the cases of injury and death linked to Peloton in 2021.)

“The problem for Peloton isn’t that it has a bad product—nor is it that there is no demand for what it sells,” Neil Saunders, managing director of GlobalData Retail, said in a statement. “The central problem is one of hubris and bad judgment. Peloton incorrectly assumed that the demand created by the pandemic would continue to curve upward.”

Investors are now keeping a keen eye on Peloton stock as McCarthy takes over and the company refocuses on prioritizing the existing member experience over machine production. It anticipates some $800 million in annual cost savings, and only time will tell what that could look like for profits and overall growth.

“We believe Foley leaving makes it more likely that Peloton ultimately sells the company, and the board clearly has major decisions to make in the days/weeks/months ahead,” equity analyst Dan Ives of Wedbush Securities reportedly said. 

Already, the news surrounding Peloton’s rough ride and big changes have shaken up Wall Street. If the company does sell, that has the potential to mean big gains for investors who own shares of Peloton stock.

Regardless, many investors choose to put their money behind companies going through shakeups with leadership or that have seen their stock plummet due to poor earnings reports or mass layoffs. That’s where the phrase, “buy the dip,” comes from. The dip, however, is a short-term blip in price; the idea is that, over time, the stock should bounce back and up in value.

However, it’s important to spot the difference between a stock dip and a total correction. A correction refers to a decline of 10 percent or more in the price of a stock. It can last for days, weeks, months, or more. Reviewing a stock’s technicals can offer you insights into its performance in the past to better anticipate what’s ahead.

However, analyzing historical performance data and volume to forecast the future direction of a stock takes time and effort. Instead, Q.ai can help investors diversify to maximize rewards and minimize risks as Wall Street reacts to these kinds of changes in the tech and consumer stock spaces.

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