Peloton Interactive, Inc. (PTON) operates an interactive fitness platform in North America and internationally. As of June 30, 2022, it had approximately 6.90 million members.

PTON gained massively amid the covid-19 pandemic due to its stay-at-home fitness facilities. Moreover, On September 29, 2022, PTON and Dick’s Sporting Goods (DKS) announced their partnership by which DKS will sell PTON’s hardware products in more than 100 U.S. retail locations.

However, PTON is currently trading near its 52-week low of $6.66, which it hit on October 3, 2022. Also, on October 6, 2022, the company declared its plans to cut about 500 jobs, which is approximately 12% of its remaining workforce, marking PTON’s fourth round of layoffs in 2022.

Over the past month, the stock has lost 22.8% to close the last trading session at $8.45. It has lost 76.2% year-to-date and 90.2% over the past year.

Here is what could shape PTON’s performance in the near term:

Weak Financials

For the fourth quarter that ended June 30, 2022, PTON’s total revenue came in at $678.70 million, down 27.6% year-over-year. The company’s revenue from Connected Fitness Products came in at $295.60 million, down 54.9% year-over-year.

Moreover, its net loss came in at $1.24 billion, up 297.3% year-over-year, while its loss per share came in at $3.68, up 250.5% year-over-year. Also, its adjusted EBITDA came in at a negative $288.70 million, compared to a negative $45.10 million in the year-ago period.

Stretched Valuations

In terms of its forward EV/Sales, PTON’s 1.34x is 29.3% higher than the industry average of 1.04x. Its forward Price/Sales of 0.95x is 22% higher than the industry average of 0.78x. In addition, its forward Price/Book of 9.14x is 292.8% higher than the industry average of 2.33x.

Poor Profit Margins

PTON’s trailing-12-month gross profit margin of 19.49% is 46.5% lower than the industry average of 36.42%. Its trailing-12-month negative EBITDA and net income margins of 39.09% and 78.94% are lower than the industry averages of 11.25% and 5.62%, respectively.

Furthermore, PTON’s trailing-12-month ROCE, ROTC, and ROTA of negative 240.96%, 30.47%, and 70.19%, compared with the industry averages of 14.91%, 6.86%, and 5.12%, respectively.

POWR Ratings Reflect Bleak Prospects

PTON has an overall rating of F, equating to a Strong Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

PTON has a D grade for Value and Quality, consistent with its higher-than-industry valuation multiples and lower-than-industry profitability margins, respectively.

In addition, it has a D grade for Stability, in sync with its beta of 1.50.

In the 61-stock Consumer Goods industry, PTON is ranked #59. The industry is rated C.

Click here for the additional POWR Ratings for PTON (Growth, Momentum, and Sentiment).

View all the top stocks in the Consumer Goods industry here.

Bottom Line

PTON delivered a dismal performance in the last reported quarter. Moreover, its revenue is expected to decrease 14.9% year-over-year to $3.05 billion in 2023. Further, its EPS is expected to decline 76.5% per annum for the next five years. Given the stock’s stretched valuations and poor profitability, I think PTON might be best avoided now.

How Does Peloton Interactive, Inc. (PTON) Stack Up Against Its Peers?

While PTON has an overall POWR Rating of F, one might consider looking at its industry peers, Mannatech, Incorporated (MTEX), which has an overall A (Strong Buy) rating, and PUMA SE (PUMSY), Reckitt Benckiser Group plc (RBGLY), and Kimberly-Clark Corporation (KMB), which have an overall B (Buy) rating.

PTON shares were trading at $8.71 per share on Thursday afternoon, up $0.18 (+2.11%). Year-to-date, PTON has declined -75.64%, versus a -22.06% rise in the benchmark S&P 500 index during the same period.

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.

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