Chris Wang chats with Nicole Petallides, host of the Trading 360 and the Watch List, about Peloton's latest earnings release.

Peloton

  • CEO McCarthy has done a great job in stabilizing the ship – turnaround going well
  • Core subscribers are very loyal to the brand
  • Macro environment is a headwind as the hardware is expensive (Bike+ $2500, Tread $3495, Row $3195)
  • Year 2 of turnaround focused on attracting 1 million trial members to the Peloton app; return to revenue growth
  • Over 3mn fitness subscribers; annualized $1.5bn in revenue; trading at 3.5x subscriber revenue

Peloton turnaround going strong

CEO Barry McCarthy outlined three priorities for the business last May: (1) stabilizing our cash flow, (2) getting the right leaders in the right roles, and (3) reigniting growth. – so far he has delivered on first 2 and he is out to prove that he can return Peloton to growth in 2023.

McCarthy has great pedigree with his many years serving as CFO at Spotify and Netflix. Thus far in his 1 year tenure at as Peloton CEO, he has been true to his word and has been executing well in turning around a company that had a bloated cost structure and significant inventory problems.

If this past year has been about restructuring Peloton’s business and stabilizing its financial performance, then the next twelve months will be about capturing the moment to restore Peloton’s growth via its good/better/best product strategy (Peloton app, certified refurbished, rentals, premium priced) and through new partnerships (AMZN – one of best sellers on Prime Day, Dicks, Hilton partnerships).

In 2023, Peloton is focused on attracting more than 1 million prospective members to trial Peloton app (followed by profitable conversion); restore int’l growth; return to revenue growth; reach cash flow breakeven.

Over the longer term, the big question is: How much can they charge for the connected fitness subs over time? Can they continue to raise price and not increase churn? McCarthy certainly has experience in this respect with his time at Netflix.