Daily Brief: Peloton Is Going Nowhere Fast

Daily Brief: Peloton Is Going Nowhere Fast

over 1 year ago3 mins

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Peloton announced yet another massive quarterly loss on Thursday.

What does this mean?

You don’t have to be a financial expert to tell that a company is in dire straits when its own freshly minted CEO compares it to “a cargo ship in peril”. And it’s easy to see why: the number of subscribers to Peloton’s services didn’t rise at all last quarter from the one before, while the number of workouts on its equipment fell by a fifth. That led revenue to plunge 28% in the same period, and its losses to scrape $1.2 billion – quadruple what it lost this time last year. Peloton’s expecting its revenue to come in well below analysts’ predictions too, which was the final straw for investors: they sent its stock down 7%, bringing its total drop in the last year to 90%.

Peloton revenue

Why should I care?

Zooming in: Look on the bright side.

There was a bright spot in Peloton’s results: it was the first time subscription revenue – which is much more profitable than equipment – made up the majority of its sales. There are rumors that it might even give customers access to its workouts via non-Peloton fitness equipment, which would help on that front too. And this would only be one step in its grand turnaround plan: the company has also cut costs by laying off thousands of workers and shuttering factories, with big ambitions to outsource its manufacturing to third parties.

Peloton stock

The bigger picture: If in doubt, ask Amazon.

Peloton also announced this week that it would start selling its products on Amazon, having sold them exclusively on its own website up to now. It’s all in view of achieving its goal of positive cash flow in the second half of the next financial year, and analysts think it’s onto something: Amazon accounts for around 40% of all US ecommerce sales, so it should help reduce distribution costs while expanding Peloton’s reach even further.

US ecommerce sales

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The Cracks In Salesforce Are Starting To Show

Salesforce image

Salesforce posted better-than-expected quarterly results earlier this week, but the future looks dicey.

What does this mean?

At first glance, Salesforce impressed across the board last quarter: revenue from its “platforms and other” segment – which includes Slack – was up 53% from the same time last year, “sales” was up 15%, and “service subscription and support” was up 14%. That helped the company bring in revenue that was a better-than-expected 22% higher than the same time in 2021.

The problem is the impending economic slowdown. Salesforce’s customers are increasingly letting their agreements expire, while those that renew them are so tentative that it’s taking longer than normal to get across the line. Throw in the fact that the strong dollar is dragging down the value of the money Salesforce generates overseas, and it follows that the company’s outlook for this quarter came in worse than expected.

Salesforce revenue
3Q 2023 is a projection | The Wall Street Journal, Salesforce

Why should I care?

For markets: Slack just got pricier.

Investors sent Salesforce’s stock down 7% on the news, meaning it’s now down more than 30% this year – over twice as much as the wider market. The company’s hoping its first ever share buyback program – to the tune of $10 billion – will help turn things around, reducing the number of its shares in circulation and pushing up the value of those left over. It even announced a price hike for Slack, which will be a first in the platform’s eight-year history.

Salesforce stock
Source: Google Finance

Zooming out: What would Snowflake do?

This is where Snowflake’s business model gives it the edge: the Buffett-backed software company doesn’t charge a flat fee, but bills customers according to how much they use its data storage and analytics products. That flexibility might be why it increased its customer count – which includes BlackRock and Kraft Heinz – to nearly 7,000 last quarter, and why the company gave a better-than-expected sales outlook too. That’s investors’ kind of update: they sent Snowflake’s shares up 17%.

Snowflake customers
Source: Snowflake


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