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Peloton stock is up 98% in 2023 taking the market cap of the company to 5.5 billion dollars. With 871 million of cash and 1.7 billion in debt, the enterprise value is roughly 6.3 billion.
Peloton’s recent earnings report...
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Peloton stock is up 98% in 2023 taking the market cap of the company to 5.5 billion dollars. With 871 million of cash and 1.7 billion in debt, the enterprise value is roughly 6.3 billion.
Peloton’s recent earnings report revealed the company made 3 billion in revenue last year. However, the company is still not profitable, posting negative net income as well as negative adjusted ebitda and free cash flow. So the company is unprofitable and valued at two times revenue.
One reason the stock has rallied is that the company has made steps to cut costs, manage debt and move the company towards profitability.
New CEO Barry McCarthy has outsourced the manufacturing of Peloton products, cut headcount by over 50% and is positioning the company towards higher margin subscriptions.
Peloton units like bikes are loss leaders and as you can see, Peloton subscriptions now drive more revenue than Peloton hardware products.
Importantly, in the most recent quarter, Peloton reported minus 94 million in free cash flow which is a huge improvement from the previous year’s minus 747 million. In fact, if you strip out one time costs, free cash flow for the quarter would have been just about positive.
The focus on costs and the raising of new debt means the company should avoid bankruptcy. But despite these improvements, an investment in Peloton still has risks.
Notably, membership growth is flat over a quarterly and yearly basis. And subscription revenues didn’t increase in the recent quarter. Furthermore, management expects only a 2% increase in subscriptions for next quarter. So we’re not seeing an awful lot of growth.
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