Shares of Peloton Interactive (NASDAQ: PTON) were sliding after an initial pop in response to news of layoffs and the departure of CEO Barry McCarthy gave way to selling in the regular trading session.
As a result, the stock closed down 2.5%, recovering most of its losses after it bottomed out down 16% around 11 a.m. ET. The stock had opened up as much as 18% higher as it initially rallied on the announcement.
Image source: Peloton.
What to make of the latest Peloton news
Peloton investors seem to be arguing over the implications of the latest upheaval at the connected fitness company.
On the one hand, it seems easy to posit that layoffs and a CEO change are bullish for the company as they could be the spark that ignites the long-awaited turnaround for the one-time pandemic star. Throw in the fact that stock has fallen as far as it has, and buying it looks even more enticing.
On the other hand, the news only makes Peloton look more broken, as McCarthy was brought in just a little more than two years ago to turn around the at-home exercise company when it was struggling in the aftermath of the pandemic.
Can Peloton be fixed?
This is the million-dollar question for the company, but at this point, I'd lean against expecting a recovery in the stock. Peloton's brand awareness is high. It was a buzzy brand during the pandemic, which means that consumers who would have bought the product, especially during the shutdown period, probably already did. It hasn't been easy for the company to find new customers since then, and it seems unlikely to get easier.
For the current fiscal year, it expects a 1% decline in paid fitness subscriptions and a 4% decline in revenue. While the company is making significant improvements on the bottom line through cost cuts, it will need to deliver revenue growth for the stock to make a recovery.
It will fall on the next CEO's shoulders to come up with a plan for that. Stay tuned for more updates on the CEO search and a potential transformation plan, and expect the stock to remain volatile in the meantime.
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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Peloton Interactive. The Motley Fool has a disclosure policy.
