Penny Stock Peloton Falls Toward Zero

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24/7 Insights

• The Peloton Interactive Inc. ( NASDAQ: PTON ) share price has declined, and with good reason.
• Despite securing new funding, the company continues to struggle to survive.

Unable to regain sales for its exercise equipment, software, and subscription products, and without a chief executive officer, Peloton Interactive Inc. ( NASDAQ: PTON ) penny stock shares have dropped toward zero. Customer demand is disappearing, and the company's rivals are gaining with less expensive products.

Peloton raised $1.4 billion to buy back $800 million in convertible secured notes, which had pressured its need for cash. These were due in less than two years. It will offer another set of notes due in 2029. It will get a five-year $1 billion loan and a revolving credit line of $500 million. According to Bloomberg , “The loan is unrated and is being marketed to a broad range of investors, including direct lenders, private credit providers and loan investors that have the ability to buy debt not graded by rating firms, according to a different person with knowledge of the matter.” In this case, “unrated” could be read as “very risky.”

Still a Dog

Peloton investors are not fooled.

Peloton’s stock has decreased 73% in the past two years and 85% in the past five. The new refinancing did not cause a big rally; investors know better.

Peloton remains a dog of a stock. In the most recent quarter, revenue dropped 4% to $718 million. That was not the main event. The company posted a loss of $173 million. It lost $195 million in the previous quarter and $276 million in the same quarter of the year before.

Peloton has tried almost everything to get back on track. It sells used versions of its equipment, which is a way to compete with itself. It offers its equipment at Dick’s Sporting Goods and on Amazon. People bought its machines during the pandemic when they were trapped at home. That period has been over for nearly two years.

Perhaps Peloton’s most significant challenge can be found at Amazon. Its bikes cost as much as $2,495 there. There are also over a dozen competing bikes that cost under $500. How many consumers will pay the premium? A bike bought at Peloton's site can easily cost over $2,200,

Additionally, every major gym, and some smaller ones, have exercise bikes of their own.

Peloton products are “upmarket.” It is separate from the cheaper ones in terms of whether it can sell enough equipment and subscriptions to survive.

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