happy friday friends welcome back to between bells pelt
time just can't seem to catch a break.
According to reports,
the company will temporarily halt production of their bikes and treadmills
and that's due to slow consumer demand. That shares were down yesterday at $24.22
as well below their initial I. P. O. Price of 29 bucks.
Now the stock is doing a little bit of a rebound today, up about 12% so far.
But this all comes after the peloton ceo john Foley
called the rumors and that CNBC report false,
that's boosted the shares up so far today.
Pelton's earnings report is coming out on february the eighth.
So could more bad news beyond the horizon for the company.
Well, joining us now to discuss is Simeon Siegel
managing director and senior analyst over at BMO Capital Markets.
Simeon such a pleasure to have you here. Thanks so much for joining us.
What's your take on all of this?
I mean my goodness, peloton just can't seem to catch a break here.
Yeah, good, good to be here. Thanks for having me. That's a very broad question.
There's a lot, there's a lot of nuances.
Um listen, I think that at the end of the day, there's a few ways to look at this.
Peloton is phenomenal brand.
Peloton has been a phenomenal story,
but that story stretched a lot further than the numbers
and I think when a brand does not have competition,
that brand does not need to compete.
That brand does not need to market that brand does not need to advertise or discount.
That's not the case anymore connected finishes a very
uh kind of increasingly growing and increasingly competitive landscape.
So the dynamic of how to build that business has changed.
It's gotten more expensive.
I think that was the beginning,
but I think what we're really seeing is there
was a supply demand mismatch during the pandemic.
There's a supply demand mismatch right now.
But unfortunately it's on the other side.
They used to have too much demand and not
enough product now they have too much product,
not enough demand.
Is this also a case of maybe a company that got too big too fast?
Or is this a case of changing consumer habits that were one at one point, you know,
invoked during the pandemic and are now changing because we're
sort of in a different phase of the pandemic.
I think the former,
listen, there was this crazy thing that came out about 10 or 15 years ago,
it's called E commerce.
It was going to come and destroy stores
Less than 20% of all retail sales, right? But it exists. It's Omni
and this is gonna be Omni too so connected.
Fitness is here and opened up this huge convenience level,
but people still want Jim's as well.
So there'll be a blend, I believe, I believe it'll be on me.
But I think you you put it perfectly,
they grew too far too fast and what happened was they took that demand.
They took the strength during the pandemic
and play that out as if it would last forever and build accordingly.
The irony of the pandemic is that because of that MS demand?
Because of those increased investments,
telethon watched their cash drop while spotlighting how great of a sector
this was and helping their competitors actually raise their own capital.
So there's this dynamic where I still think we're at the early stages, I think,
to give telethon all the credit there, do they still have 2.5?
More than 2.5 million members right now that are paying, It's a great business.
But what it's called, what the stock price should be worth is another conversation.
So, is there any indication that pollutants losing members?
Because you're right,
they still have and they have a very loyal and devout devout fan group and user base.
But as now,
the proliferation of more connected fitness equipment is out there and
there's cheaper equipment also out there for people to get.
Because peloton is sort of on the higher end of the spectrum here.
Is that a concern if we are in the early stages of this?
Yesterday was a very weird news flow day. Right?
So there's been a series of whether they're leaks or whether they're scoops,
whatever we're gonna call them.
They were unsanctioned reports
then we had yesterday in response,
You brought it up earlier Peloton first put out a preannouncement.
So they gave a color on what the quarter was
actually looking like and then there was that response,
which was a little bit unclear what it was.
Refuting versus what it was,
how, how it was framing. It's words were really important.
They said they're not holding all of production.
So there were different pieces in there, but the middle part,
we actually got some numbers.
The turn was okay, so the turn was a little bit better than than fears.
So I think right now we haven't seen that erupt upwards.
We haven't seen them flag again, the people that are engaged or engaged,
but we've been seeing less usage.
So on the way up
the telethon talked about how the workouts per month were really
good indicator of turn those who have been coming down.
So I guess it begs the question of it that the leading
indicator of turn on the other side as well probably is,
but we haven't seen it yet.
But I think to your point, the other brands are in their infancy as well.
So whether they're cheaper products or whether they're not bike related products,
they're just other expensive
connected fitness products with another subscription attached to it.
There is no in 2020, you were stuck at home and there was no other option in 2022,
you're not stuck at home and there are plenty of options.
One person actually said to me the other day, you know,
peloton unfortunately gets a bad rap because they're the most high profile,
the biggest of all sort of all the companies out there.
And a lot of this is just really sort of bad luck.
I mean how would they have expected the chris noth
Mr big situation to have happened insects in the city.
You know the the situation with with the kids getting injured on the treadmills,
they sort of were kind of looked at because they're sort of the bigger company here.
Is that maybe playing a role in this do you think just because
Peloton is such a high profile company that's playing a role in this?
But listen there's there's a few elements even in that
there's a little unfortunately it was more than than injuries but
also we understand that that's not a peloton specific conversation
but I think that there's a huge human element here.
I mean there's all these conversations we keep
seeing about layoffs and keep saying like we have
to understand right there this is a company
with real people and very conscious of that.
I think the question you're asking are they unlucky?
But we also still have to recall is despite all this activity.
Yeah the stocks down a lot
But I haven't checked where it is today right now.
It's still roughly a $10 billion dollar company.
So and there's this conversation of the stock price that you mentioned,
it's below the I.
P. O. Price but we also have to internalize that they've added shares since the I. P.
O. As well. So it's not just 25 versus 29.
There's the market cap actually goes higher. So do I think there's bad luck.
I think what Peloton their greatest asset and to their extreme credit,
the marketing department at peloton is unparalleled.
They are so
phenomenal at storytelling.
The problem is, or the question mark becomes then okay,
where does reality and rhetoric?
Where does it settle in? And was the sex in the city instance was the,
was the recall conversation,
is that just an indication that they're loosening their grip on
that story telling a little bit from the corporate side.
So As long as it is there a mismatch now between the quality of storytelling
from a brand side versus the quality telling the story side from the corporate side.
That's it's an interesting question that you bring up that's worth digging in.
Yeah and definitely a company you're right but you're right,
there's still you know,
$10 billion John Foley said yesterday has been able to sort of correct where
it was at yesterday as we see it's up double digits so far today?
Simeone. Such a pleasure to have you here.
Simeon Siegel managing director and senior analyst at
BMO capital markets joining us here on cheddar news