New Pivot Price for Peloton Opens Door to Potential 50%+ Pop in Stock
Improvement in this beleagured name has now set up a potential opportunity for investors. Here's the plan I will be implementing.
You're reading 0 of 1 free page.
Register to read more or Unlock Pro — 50% Off Ends Soon
More than two weeks ago, beleaguered pandemic workout darling Peloton Interactive PTON realeased its fiscal second-quarter financial results. There was nothing to write home about in the numbers.
Peloton reported a GAAP loss of $0.24 per share on revenue of $673.9 million. The bottom-line print fell about a nickel per share short of Wall Street's expectations. The top-line number did actually beat the Street, but still reflected a year-over-year contraction of 9.4%.
The company's financial performance has been more or less awful since the heady days (for Peloton, not the planet) of 2020 into 2021. Since fiscal second quarter 2021, Peloton has posted exactly one profitable quarter. Since fiscal second quarter 2022, the company has posted exactly one quarter of year-over-year revenue growth and that one quarter (FQ4 2024) was good for growth of just 0.23%.
There Were Some Bright Spots
Peloton raised full fiscal year guidance for adjusted EBITDA from $230 million-$290 million to $300 million-$350 million, and its target for full fiscal year free cash flow from $125 million to "at least" $200 million. Additionally, the company was able to reduce its total debt load by more than $190 million on a year-over-year basis and cut net debt by 30%, or more than $281 million.
Additionally, for the quarter reported, while revenue generation suffered a 9.4% decrease, there was 15% sequential growth. Also, connected fitness gross margin widened by 860 basis points (to 12.9%) as subscription gross margin improved 60 basis points (to 67.9%). Free cash flow for the quarter reported printed at $106 million, up from $10.7 million sequentially and- $37.2 million for the year-ago comp.
As for the balance sheet, Peloton's current ratio now stands at 2.06, which is not weak at all. Once adjusted for deferred revenues, this ratio rises to 2.75. The debt load is still heavy, even with the recent effort to pay it down, at $1.489 million, but the company's cash position is up to $829 million. That's up almost 19% over six months.
My Thoughts
No, Peloton is not out of the woods, but the company has been going through a transformation for years now and while not yet GAAP profitable, is in far better fiscal shape than it had been and can survive as an independent company for the foreseeable future.
This improvement in Peloton's situation has not gone unnoticed by the markets, and has now set up a potential opportunity for investors that may have missed the pop in the share price in mid to late 2024.
Check this out...
Yes, I do see the stock's loss of its 50-day simple moving average (SMA) on Friday, but contact with that line has not yet been lost. I also see that support for the stock showed up in January at nearly a 50% retracement of the stock's August through December run.
PTON stock has now developed what looks like a cup-with-handle pattern. How deep that handle might go is a question mark, but after making contact with both the 21-day exponential moving average (EMA) and 50-day SMA on Friday, PTON could be close to reversing.
The pivot for the pattern is at the $10.25 level. A take and hold of that level could open the door to prices as high as $13 — a 52% pop from Friday's closing price if this works.
I will be implementing this plan once this article is published and you all have a chance to read it as I will not knowingly front-run my own article.
At the time of publication, Guilfoyle had no positons in any securities mentioned.
