What’s up with the market?
On Tuesday morning, Peloton (PTON) released FQ2’s financial statement and the results and outlook were a mess. Investors appeared to care less, however, and instigated Peloton shares’ best day ever, as the session ended with 25% of gains attached to the ticker.
Investors appeared happy that Peloton’s restructuring plan and cost-cutting measures will see the company shed 20% of its workforce (2,800 jobs) and that Peloton Founder and CEO John Foley will step down.
Despite running the ship for 16 years, Foley’s tenure comes an end on a sour note, following a year of recalled products due to several accidents and dwindling demand after the pandemic-era highs. Former Netflix and Spotify CFO Barry McCarthy is taking Foley’s vacated position.
Wedbush’s Daniel Ives thinks the changes in the C-Suite set up a “fork in the road path for Peloton in the months ahead.”
In fact, in contrast to the Street’s giddy reaction, and the company’s efforts to “spin a path of restructuring and growth ahead,” Ives thinks the latest changes are a harbinger of more trouble ahead. “The reality is that Foley was the pilot on the Peloton growth plane and him leaving paints a bleak picture with the main visionary no longer in charge,” the 5-star analyst opined.
Ives thinks the precedent for companies going into cost cutting mode as a way of changing course offers “cautionary tales of troubled consumer products,” citing Fitbit and GoPro as unfortunate examples.
As such, the analyst thinks the prospect of a takeover is still the best option, and one shareholders are likely to agitate for over the coming months.
Potential suitors include Amazon (AMZN) and Nike (NKE) but Ives thinks that if a bidding process kicks into action, Apple (AAPL) is the most likely acquirer due to the “clear strategic fit with its healthcare/fitness/ subscription initiatives.”
“In a nutshell,” the analyst summed up, “We believe Foley leaving makes it more likely that Peloton ultimately sells the company and the Board clearly has major decisions to make in the days/weeks/months ahead.”
Ives coverage does not include Peloton, but for AAPL, he keeps an Outperform (i.e. Buy) rating and $200 price target, which implies shares will gain 18% over the coming months. (To watch Ives’ track record, click here)
Most on the Street like Apple too; of the 29 reviews on record, 5 sit on the fence, but 24 are positive, all leading to a Strong Buy consensus rating. The forecast calls for 12-month gains of ~14%, considering the average price target clocks in at $192.42.
As for PTON, opinions are more spread out. 13 Buys, 9 Holds and 2 Sells add up to a Moderate Buy consensus. In addition, the $47.09 average price target indicates ~37% upside potential.
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.