What Happened?
Shares of exercise equipment company Peloton (NASDAQ: PTON) jumped 4.8% in the morning session after the company reported a surprise second-quarter profit and beat Wall Street's revenue expectations. The connected fitness company reported a surprise second-quarter profit of $0.05 per share, significantly outperforming Wall Street's expectations for a loss of $0.05 per share. Revenue for the period also topped forecasts, coming in at $606.9 million. The positive results were driven by a significant improvement in profitability. Adjusted EBITDA, a measure of core earnings, came in at $140 million, crushing analyst estimates of $83.17 million. Furthermore, the company's operating margin swung from a negative 9.9% in the same quarter last year to a positive 4.9%, highlighting successful cost management efforts as part of its turnaround strategy. While the company's revenue guidance for the next quarter was slightly below expectations, its full-year EBITDA guidance was a bright spot, exceeding analyst forecasts.
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What Is The Market Telling Us
Peloton’s shares are extremely volatile and have had 72 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 4 days ago when the stock gained 3.3% on the news that markets rebounded following a sharp sell-off in the previous trading session as weaker-than-expected U.S. jobs data fueled investor hopes for a potential interest rate cut by the Federal Reserve. The July Nonfarm Payrolls report revealed a gain of only 73,000 jobs, significantly below the 110,000 expected. Compounding the news, prior months' figures were revised downward by over 250,000 jobs. This data, indicating a cooling labor market, has led investors to dramatically increase bets on a September interest rate cut by the Federal Reserve, with the probability jumping to over 80% according to the CME FedWatch Tool. The prospect of lower borrowing costs typically stimulates economic activity and boosts consumer spending on non-essential goods and services, which directly benefits companies in the consumer discretionary space.
Peloton is down 14.1% since the beginning of the year, and at $7.59 per share, it is trading 28.2% below its 52-week high of $10.57 from December 2024. Investors who bought $1,000 worth of Peloton’s shares 5 years ago would now be looking at an investment worth $113.01.
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