Peloton stock pops on Q2 earnings beat

Yahoo Finance Live anchors discuss second-quarter earnings for Peloton, which showed narrower-than-expected losses.

Video Transcript

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- Pandemic darling Peloton sees net losses narrow in its latest quarter while subscriptions generate more revenue than hardware sales. CEO Barry McCarthy pointing to this trend as gross margin accretive and the persistence of it would represent a turnaround in the business.

Just bottom line, not a good quarter from Peloton. I understand what Barry's talking about, improvement in the adjusted operating profits, improvements in the free cash flow, so less negative. The outlook not good. Subscribers not good.

And then he points out, what I count, is 11 things on his plate of to-do list at least this year. One of them, return to year-over-year revenue growth. That would be good. Unclear how that's actually going to happen. Sell an Ohio manufacturing facility. That was supposed to be sold last year. That didn't happen.

And then restructure middle mile warehouses, continuing restructuring the retail store footprint. Lots on his plate. A new leadership team in tow here. Just not good. None of it's good.

JULIE HYMAN: I mean, his message seems to be-- if you look at, sort of, interviews that he's giving and press he's doing, the message seems to be, we're surviving.

BRAD SMITH: Yeah.

JULIE HYMAN: But like--

BRIAN SOZZI: That's not a ringing endorsement.

JULIE HYMAN: No, it's not.

BRIAN SOZZI: Buy our stock because we may be around in a year or two.

JULIE HYMAN: But I guess people are buying the stock.

BRAD SMITH: Well, yeah, I mean, and he said last year, as well, turnaround's hard work and intellectually challenging, emotionally draining, physically exhausting, and all consuming. He can expect all of that to be the case here with this potential turnaround or epic comeback, as he was calling it within the release.

But I think you also need to think about the fact that Peloton and what they signaled in the guidance from this point and into next quarter, is that they're not gonna be prioritizing the same type of connected fitness device growth that they had seen, even this time last year.

And so 2%, it seems like sequential growth is what they're gonna be looking for from this point. And that sequential growth is what's key to track at this point because the year-over-year comps are gonna be dismal for a little bit, at least if you're comparing it to the next-- even going into this next quarter, it's still going to be a bad comp.

And so now you get into the point of, all right, you've got all these partnerships-- UnitedHealthcare, Dick's, Amazon, Hilton. What does that signal for Peloton? It signals that they're not necessarily trying to position themselves as a pure play fitness company anymore. It's how do we position the brand as a wellness company that just happens to have devices that are able to help keep people fit?

And I imagine the next play could be even more into the health care landscape where they're saying, all right, yeah, you can get a discount on this bike, as long as you're able to pass that info through to your health care insurance provider, as well.

BRIAN SOZZI: Or maybe put a bike in the doctor's clinics. And while you wait in line, you can take a bike. But no, really, no, three months ago, we hammered Barry for these investor letters he's been putting out. He just passed his one-year mark. I didn't like that letter last time. This one was a little more subdued, even though, Julie, he did tease, I think, an epic come-- he used epic. Epic turnaround for the company. I mean, I don't see it and it's not in the outlook.