Citron Research founder Andrew Left shares why he thinks Peloton should invest in Blue Apron.
Premium fitness company Peloton reported its first sales increase in nine quarters on Thursday, indicating its turnaround plan appears to be on track.
The company reported fourth-quarter sales rose 0.2% year over year, its first year-over-year increase since fiscal 2022. This is seen as a positive sign for a company that has been struggling to cope with a post-pandemic recession and the aftermath of a child’s death caused by a treadmill.
| Ticker | safety | last | change | change % |
|---|---|---|---|---|
| P-ton | Peloton Interactive, Inc. | 4.53 | +1.17 |
+34.67% |
With shares soaring more than 30%, AllianceBernstein analyst Aneesha Sherman told Fox Business the real question is whether the brand can continue to grow.
The company fired CEO Barry McCarthy in May but has struggled over the past two years to stay relevant with a range of initiatives to cut costs and grow its customer base as people return to working out in brick-and-mortar gyms.
Sherman acknowledged that the rebuild plan is working, albeit in the short term.
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“The priorities outlined by interim management were to stabilise the balance sheet and reduce costs, and they have done that,” she said, adding that margins have improved, debt has been refinanced, inventory has been reduced and cash flows are improving.
Over the past two years, Peloton has struggled to stay relevant as people returned to working out in traditional gyms. (Ezra Shaw/Getty Images/Getty Images)
But when it comes to brand growth, “the company hasn’t addressed this issue at all and is pushing its growth targets further out,” Sherman said, adding that the company’s guidance again suggests negative growth for the full year.
A look back at Peloton’s struggles since the pandemic
Addressing the issue will ultimately be in the hands of the new CEO: On the earnings call on Thursday, board members hinted they had found a candidate and said they expected the new CEO to take the reins at the company’s next earnings call.
Pedestrians walk in front of a Peloton store in Manhattan on January 25, 2022 in New York City. (REUTERS/Carlo Allegri/File Photo/Reuters Photo)
Sherman said the company “remains fairly valued as a shrinking, but cash-flow positive, business,” but added that “to further upside, it needs to stabilize its earnings base and demonstrate it can begin to grow again.”
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While Sherman doesn’t foresee a “major comeback in terms of a sudden surge in growth,” he believes the company should be able to grow at the pace of real gross domestic product.
“The bar is so low that even forecasting modest low single-digit growth would generate some upside for the stock,” she said.
Peloton’s shares have fallen more than 37% over the past 12 months and are well off their highs of more than $160 per share hit in December 2020.
