The ongoing earnings season has not been fair to many beloved companies like Amazon, Netflix, Unity Software, and Coinbase. The same situation has happened with Peloton, the fitness company. The Peloton stock price collapsed by more than 10% in the regular session after the company published weak quarterly results and forward guidance. In this article, we will explain why the Peloton price increase happened in extended hours.
Why is PTON in a freefall?
Peloton had a bad quarter as its revenue declined by 23.61% on a YoY basis. It made just $964 million during the quarter while its loss per share of 98 cents missed by $0.04. Its active users rose to more than 7 million while losses continued to mount. In a shareholder letter, the company’s CEO said that he was focused on stabilizing the company’s cash flow, hiring the right people, and investing in growth.
The Peloton price increase in extended hours happened after the new CEO said that the company was working to achieve over $800 million in annual savings. These savings will involve about $500 million in operating expenses and another $300 million in Connected Fitness Program. The firm also raised a $750 million syndicated loan from Goldman Sachs and JP Morgan. This means that the firm will likely not dilute its shareholders by raising equity.
So, is Peloton stock a good buy? There are many reasons to be wary about Peloton. For example, it is no longer a growth stock, meaning that it should not have a premium valuation. There are worries about churn in its business. Most importantly, the company will likely keep generating weak headlines in the near term. Further, hopes of an acquisition have faded as the share prices of top contenders like Nike and Amazon have collapsed.
Peloton stock price forecast
The PTON stock price collapsed to a low of $10.60 on Tuesday after the company published weak results. The situation changed in extended hours as the Peloton price increase to $12.90 happened after it tested the important support at $10. Nonetheless, the stock is in a bearish trend and is below the 25-day moving average and the dots of the parabolic SAR.
Therefore, this rebound is likely a dead cat bounce, which means that the shares will likely keep falling as bears target the support at $8. A move above the resistance at $15 will invalidate the bearish view.
