Peloton: "A Steep Hill"

Note: Access all prior Peloton (PTON) research on the TSOH website

From “Peloton: McCarthy’s Missteps” (May 2024): “Management needs to prove this business doesn’t have poor fundamental economics. Personally, I still think that is a likely outcome… If it becomes apparent in the months ahead that management has addressed my lingering concerns, I’d still argue Peloton could be attractive, even at a prices ~50% above current levels.”

A lot has changed at Peloton over the past nine months.

First, the company announced that Peter Stern, whose prior experience includes time working in Apple’s first-party services business, would become McCarthy’s permanent replacement (with Stern’s comp structured to pay $50 million in equity awards through 2027). Second, they’ve made meaningful progress across a few key areas, which I will discuss today. And third, the ~50% stock price increase that I speculated about in May has since proven far too tame: at Wednesday’s close of $9.8 per share, Peloton’s stock price has increased by ~190% since “McCarthy’s Missteps” was published in May.