Shares of Peloton jumped roughly 25% on Tuesday after announcing further cost cuts and the replacement of CEO John Foley with veteran tech executive Barry McCarthy, a move that was heralded by most Wall Street analysts as a “hard but healthy” restructuring decision which decreases the likelihood of a sale.
Peloton reports lackluster quarterly earnings on Tuesday morning in which the at-home fitness company lowered its profit outlook for 2022, announced 2,800 layoffs, $800 million in cost cuts and the replacement of CEO John Foley with former Spotify and Netflix CFO Barry McCarthy.
JPMorgan analyst Doug Anmuth thinks Peloton shares will rebound in both the near- and long-term with McCarthy at the helm to provide a “steady hand” for the company as it rightsizes operations amid waning demand.
BMO Capital Markets analyst Simeon Spiegel says the company is “making hard but healthy choices to reset its business,” though he adds that the process is “rarely quick or seamless” and Peloton’s “path to recovery remains long.”
Baird’s Jonathan Komp says Peloton is getting “a highly experienced” technology and media executive in new CEO Barry McCarthy, who has expertise in the subscription business and can address investor concerns about growth.
The recent management changes also strongly “suggest” that Peloton won’t be up for sale anytime in the near future, says Vital Knowledge founder Adam Crisafulli, a sentiment echoed by the analysts at Baird and BMO Capital Markets.
While the recent news “lowers the probability of a strategic takeover” from megacaps like Apple, Amazon or Nike, outgoing CEO Foley said in an interview Tuesday that Peloton would remain open to any value creating opportunities for shareholders.