Peloton earnings preview

After a summer stock price surge, now serious investors will be looking to see if a more disciplined Peloton can get back its 2020 mojo.
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The long road to recovery

Peloton went from the star of the stay-at-home days to one of the biggest victims of the post-pandemic recovery, and now suffering from an aversion to speculative bets. The average of analysts expect the stock to double in price in the future, but that comes with several important caveats.

The chief complaint among analysts is that the company just can't stop hemorrhaging money. Even when sales more than quadrupled during the height of the pandemic, operating loss actually increased. And since then, revenue has fallen, leading to an even larger operating margin loss. In order to restore confidence among investors, the firm is going to have to show it is serious about raining in costs and getting the EBITDA margin back into positive. So, that's likely to be the focus of the upcoming earnings.

What can be done

Peloton is expected to report another quarterly loss, this time of -$0.76 on sales of $682.4M, down from the $934M reported last year. In these subscriber-based earnings models, usually, the focus is on the number of users because that shows if there is revenue growth. The problem is that as Peloton gains more subscribers, it has lost more money. Hence, the focus is likely turning towards announcements of concrete measures taken to reduce costs.

Last month, Peloton announced that it would outsource its bike manufacturing. And the month before that, announced a new CFO. The new money manager, Liz Coddington comes from Amazon Web Services, a company famous for "trimming the fat". Traders are likely to be very interested in what she's going to do to give Peloton the treatment that it promises to its users!

Peloton floats above 50-SMA

The Peloton share price breached the 50-day average of $10.35 in early August but the stock is heading back towards the SMA as support. Losing it could see prices decelerate down near the all-time low of $8, and perhaps lower.

On the flip side, a bounce could send the stock soaring to the 200-day average of $25 in the long term. Near-term, the upside is limited to the round level of $20, where the swing low of March 14 can be observed. In the shorter term, $14 is a must-break level for any sort of chance at any upside.

Key takeaways
Peloton has seen its stock price plummet due to post-pandemic recovery but also a lack of investor confidence amidst increased operational losses. Despite analysts expecting the stock to double, they will want to see the company taking serious measures to cut costs and get margins back to positive. Peloton is expected to report another quarterly loss despite gaining more subscribers. So, traders will be interested to see what the new CFO is going to announce to “trim the fat”.