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Peloton stock jumps 12% after CEO John Foley steps down and the company says it will slash 2,800 jobs

Shalini Nagarajan   

Peloton stock jumps 12% after CEO John Foley steps down and the company says it will slash 2,800 jobs
  • Peloton stock reversed losses to jump 12% Tuesday after the company said CEO John Foley will step down.
  • It announced plans to cut 2,800 jobs, which would affect 20% of its corporate workforce.

Peloton's stock recovered losses and rose 12% in regular trading Tuesday after the company announced CEO John Foley will step down and the embattled bike-maker plans to cut 2,800 jobs.

Foley, who has been at the helm of the company for a decade, is set to become executive chairman. Former Spotify and Netflix CFO, Barry McCarthy, will replace Foley and join Peloton's board.

After seeing lower demand for its bikes and treadmills in addition to steep losses, Peloton said its job cuts would affect 20% of its corporate workforce. This does not impact its instructor roster.

The Wall Street Journal first reported on the company's planned changes early Tuesday.

Peloton's stock had fallen as much as 13% in Tuesday's pre-market session after the announcement, but investor sentiment changed by the market open.

"The demands of activist investors calling for a radical shake up of Peloton appear to have been met, with the CEO set to step off what has become an increasingly difficult treadmill," said Susannah Streeter, markets analyst at Hargreaves Lansdown.

"There will be hopes Peloton will turn a corner with a new CEO in the hot-seat, and plans for a dramatic slimming down in size," she said, adding that there could be potential buyers eager to go after it if the firm recovers sales.

In late January, activist investor Blackwell Capital called on Peloton to fire its CEO and explore a sale.

Peloton has had somewhat of a turbulent start to the week. Its stock rose 25% Monday after reports swirled that Amazon and Nike are both exploring takeover bids of the once-hot digital-fitness firm.

Wedbush analyst Dan Ives touted Apple as a likely bidder too. But not everyone expects a deal to go through.

David Trainer, CEO of investment research firm New Constructs, expressed doubts Peloton will be acquired, saying there are too many competitors that offer a similar product.

"For Peloton to become an attractive acquisition target, its stock would need to trade below $15 per share, which is roughly 50% lower than current levels," he said on Monday, adding that rumors of a deal are designed to help large investors recover some of their big losses.

"Apple, Nike, and Amazon do not want the equipment and manufacturing headaches that come with Peloton's business. Peloton's customers are likely already customers of Nike, Apple and Amazon. Do you think anyone who paid top dollar for a Peloton does not already own an Apple Watch, subscribe to Amazon, or own Nike sneakers?"

Peloton's stock last traded 11% higher at $33.02 a share, and is down 11% so far this year. The company reported quarterly results earlier than expected on Tuesday, posting a net loss of $439.4 million, or $1.39 a share.

The company slashed full-year revenue guidance to $3.7 billion to $3.8 billion, down from a prior outlook of $4.4 billion to $4.8 billion.

Peloton was, arguably, one of the biggest beneficiaries of the stay-at-home economy that prevailed throughout much of 2020, when most of the world was in lockdown. The company's shares rose by almost 800% from mid-March to the end of the year, as consumers snapped up its exercise bikes and treadmills to work out at home.

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