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Peloton Shares Surge by 17% As Company Shifts to Amazon

Ticker Symbol: PTON

Peloton shares are up over 17% in the mid-morning trading session after the home fitness company said it would start selling its bikes and accessories on Amazon.com. The company has historically exclusively sold its products through its own channels, that is, through the Peloton website and firm operated retail showrooms. Chief Executive Officer Barry McCarthy said that the move would allow the company to expand its distribution network and make products more readily available.

After the company’s stationary bike became the must-have product during the pandemic, Peloton’s market capitalization grew to almost $50 billion at its zenith, higher than the market cap of the Ford Motor Company at the time. In contrast, the current market value of the company stands at $4.5 billion, as its shares have now declined 92% from the peak hit in January 2021. Today’s 17% gain cuts the year-to-date loss down to 62.5%.

Peloton burned through cash in the previous quarter as well and missed revenue and profit expectations from Wall Street. Under McCarthy, who previously served in senior roles at technology and subscription trailblazers such as Netflix and Spotify, the company is trying to pivot towards a subscription focused operation, as opposed to a product-oriented business. Subscription revenue comprised almost 40% of total revenue in the most recent quarter, up from only 15% in 2017.

The company increased its “all-access” subscription price to $44/month in April. Under the new strategy, the company is also winding down its manufacturing operations, instead focusing primarily on providing fitness content to consumers. The partnership with Amazon may allow the company to reach more consumers while transferring some of the logistics headaches to a third-party. Peloton is also redesigning its bikes so customers can assemble them at home, further saving the firm from costly installation spending.

As countries have reopened from the pandemic, demand for stay-at-home products has dropped precipitously. Gym memberships are returning to pre-pandemic levels, while many subscriptions-based businesses, such as streaming providers, have come under stress as people spend less time indoors. Peloton ended the previous quarter with just $879 million in cash. The firm is set to report its fourth quarter earnings tomorrow before market open.

This content is provided for general information purposes only and is not to be taken as investment advice nor as a recommendation for any security, investment strategy or investment account.