Peloton Stock Is Turbulent After CEO Split, Job Cuts

outside of Peloton studio in New York City

(Image credit: Michael Nagle/Bloomberg via Getty Images)

Peloton Interactive (PTON) stock is volatile Thursday as market participants take in the exercise equipment maker's fiscal third-quarter earnings report. The company also announced a change in the C-suite and a restructuring plan that will eliminate 15% of its workforce.

Starting with earnings. In the three months ended March 31, Peloton's revenue decreased 4.2% year-over-year to $717.7 million while its per-share loss narrowed to 45 cents from 79 cents.

The results came up short of analysts' expectations. According to Yahoo Finance, Wall Street was expecting revenue of $723.2 million and a loss of 37 cents per share.

From just $107.88 $24.99 for Kiplinger Personal Finance

Become a smarter, better informed investor. Subscribe from just ~~$107.88~~ $24.99, plus get up to 4 Special Issues

CLICK FOR FREE ISSUE

https://cdn.mos.cms.futurecdn.net/flexiimages/y99mlvgqmn1763972420.png

Sign up for Kiplinger’s Free Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

While the quarterly results were not great, the sentiment toward PTON stock briefly turned positive when Peloton unveiled a leadership change and a restructuring plan.

Specifically, the company announced that Barry McCarthy, who had been CEO since February 2022, is stepping down from the role, effective immediately. Karen Boone and Chris Bruzzo, two Peloton board members, will serve as interim co-CEOs as the board searches for a permanent replacement for McCarthy.

The company also said it will cut its global headcount by approximately 15%, or roughly 400 employees, reduce its retail showroom footprint and will "reimagine" its international go-to-market strategy to be more efficient.

"This restructuring will position Peloton for sustained, positive free cash flow, while enabling the company to continue to invest in software, hardware and content innovation, improvements to its member support experience, and optimizations to marketing efforts to scale the business," the company said in a statement.

As a result of its weak performance in the first nine months of its fiscal year and a historically "challenging" fourth quarter, Peloton lowered its full-year revenue outlook. The company now expects revenue in the range of $2.675 billion to $2.7 billion, which represents a decline of about 4% from fiscal 2023 at the midpoint of its range.

Is Peloton a buy, sell or hold?

Wall Street is sitting on the sidelines when it comes to Peloton stock. According to S&P Global Market Intelligence, the consensus analyst target price for PTON stock is $5.82, representing implied upside of more than 62% to current levels. However, the consensus recommendation is Hold.

Outside of the analyst community, it is vital that investors understand that while Peloton is a cheap stock to buy, it's also extremely volatile. In McCarthy's tenure as CEO, shares lost nearly 90% of their value.

And following news of his departure, the job cuts and earnings, PTON stock jumped 18% out of the gate but was last seen down 10%.

Joey Solitro is a freelance financial journalist at Kiplinger with more than a decade of experience. A longtime equity analyst, Joey has covered a range of industries for media outlets including The Motley Fool, Seeking Alpha, Market Realist, and TipRanks. Joey holds a bachelor's degree in business administration.