1 Thing to Watch in Peloton's Earnings on Feb. 5
Key Points
Peloton stock is 96% off its all-time high.
The company has reported positive net income and increasing free cash flow for the past two quarters.
A healthy bottom line sets the stage for an improving top line.
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Peloton Interactive (NASDAQ: PTON) lost another 29% of its value last year and is now 96% off of its all-time high. However, all hope isn't lost, and nearly half of Wall Street analysts who are covering the stock rate it a buy today.
The company reports earnings next week, and progress could jump-start the stock again. Here's the most important thing to watch.
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Image source: Peloton.
Can the bottom line fuel the top line?
Peloton has run into all sorts of problems over the past few years, and revenue keeps declining. However, it has made strides in getting costs under control to align with current demand. It reported positive net income for the past two quarters, as well as positive and increasing free cash flow.
Management admits that its costs are still too high and launched a new cost restructuring plan to achieve $100 million in run-rate savings through fiscal 2026.
The company releases 2026 fiscal second-quarter (ended Dec. 31) results on Feb. 5, and there are many goalposts it needs to reach as it aims for a turnaround. But management has said, "Continued momentum on bottom-line performance sets the stage for improvements on the top line." Investors should look out for profitability metrics to see if the company can maintain that healthy progress.
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Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Peloton Interactive. The Motley Fool has a disclosure policy.
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