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Peloton recall tests analyst devotion as stock decline intensifies

(Bloomberg) – Peloton Interactive Inc.’s earnings report on Thursday was meant to be an opportunity for the company to show faster product deliveries. Instead, the equipment maker finds itself in a tough spot over treadmill recalls, causing investors to question their dedication to a sinking stock. , the recall shocked traders and even prompted a reprimand from a senator. The stock fell 15%, the most in six months, as investors considered costs in addition to potential ripple effects that could threaten sales growth. “This could have other unquantifiable long-term demand impacts,” said Ed Yruma, a KeyBanc Analyst. Yruma, who has an equivalent rating on the purchase, said he would reassess his financial projections after Peloton’s earnings call on Thursday afternoon. Investors’ love affair with Peloton was already strained before the recalls . had fallen 36% this year as it struggled with extended delivery times and the easing of Covid-related lockdowns raised concerns about sales growth in the coming quarters. Still, of the 29 analysts Bloomberg-tracked who cover Peloton, all but five recommended investors buy the stock ahead of Wednesday’s news. Wall Street optimism combined with the decline in stocks pushed the gap between analysts’ targets and the stock price to 90%, the widest margin since Peloton first entered the market in 2019. reputation at a time when they were enjoying a honeymoon with Wall Street analysts. Usually, the road to recovery is neither quick nor sure. After Chipotle Mexican Grill Inc. struggled with disgusted diners with food-borne illnesses, it took nearly four years for the stock to retrace the highs it reached in 2015. Lululemon lost some of its halo the last. ten years after complaints about the quality of the fabric of yoga pants – a situation escalated when the founder of the company suggested in 2013 that the complaints were because the clothes just didn’t work ‘for the body of certain women ”. It took about six years for this title to climb back into record territory. Prior to the recall, the bulls in the Peloton had banked on a strong earnings report as a potential rally trigger, with expectations of progress in correcting the delays in the rally. shipping after the company pledged to spend more than $ 100 million to improve delivery times. The focus is now on the details of the recall, including costs, how Peloton plans to implement fixes, and the fate of its new treadmill model that was due to debut in the United States later this. this month. Peloton executives have touted how the cheaper Tread model has exceeded UK sales expectations, saying it could eventually become a “rocket” for the company. The opportunity of the treadmill was potentially greater than that of bicycles, they said, and expected its impact to be greater in fiscal year 2022. Long-term commitment Despite short-term impact On the company’s bottom line and potentially on its reputation amid the likelihood of further lawsuits, most analysts are still optimistic about Peloton’s ability to maintain a rapid pace of revenue expansion. As of late Wednesday afternoon, Peloton only got one downgrade, a buy-to-neutral reduction, at Bank of America. “We recognize that this recall is likely to result in significant short-term one-time financial costs and operational disruption, with potential damage to reputation. Said Truist analyst Youssef Squali, who has a buying note. Although Squali anticipates that the release of the new treadmill will likely be delayed, he estimates that treadmill sales represent less than 10% of Peloton’s revenue and said the company’s long-term growth prospects remain. “Peloton’s long-term reputation (after putting this issue behind it) and the opportunities within this massive segment remain strong,” he wrote in a research note Wednesday. $ 550-600 million, assuming 100% recall rate. The short-term impact on growth may not be significant, as we calculate that over 90% of its material income comes from bicycles – Amine Bensaid, BI analyst (adds details of other consumer product crises to From seventh paragraph onwards.) For more articles like this, please visit us at bloomberg.com Subscribe now to stay ahead with the most trusted source of business news. © 2021 Bloomberg LP

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About Joaquin Robertson

Joaquin Robertson

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