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Earnings Results: Peloton stock on track for yet another record gain as company replaces John Foley as CEO

Peloton Interactive Inc.’s newly announced chief executive will face a lowered bar as the maker of exercise equipment once again cut its full-year forecast, but investors seem pleased with the management shakeup.

Tuesday marked a busy news day for Peloton PTON, +24.86%, which confirmed that it would be replacing its chief executive, announced a new cost-cutting plan, and offered a lower-than-expected outlook in the process of reporting its latest quarterly results.

The balance of announcements appeared to resonate with investors, as Peloton shares were ahead more than 27% in afternoon trading Tuesday.

The stock was on track to post its largest single-day percentage gain on record and surpass the current largest increase: a 20.9% rise achieved just a day earlier amid reports that Amazon.com Inc. AMZN was among companies considering a potential takeover bid.

Peloton didn’t announce a takeover offer, but it did say Tuesday that Chief Executive John Foley will be stepping down from his role and replaced by Barry McCarthy, who served as Spotify Technology SA’s SPOT, -4.28% chief financial officer through January 2020. Foley, a Peloton co-founder, will stay with the company and become its executive chair, the company announced Tuesday morning.

Peloton further discussed a new cost-cutting program that it expects could bring at least $800 million of annual-run rate savings once fully implemented. In doing so, the company will cut about 2,800 positions globally and reduce its corporate positions by roughly 20%. It will scale back its owned and operated warehouses while boosting its arrangements with third-party logistics services.

“Peloton’s roster of instructors and breadth and depth of its content will not be impacted by the initiatives announced today,” the company noted in a release.

Despite the sharp rise in Peloton’s stock price this week, it is still off more than 70% on a 12-month basis.

The company acknowledged in a letter to shareholders that it’s experiencing a “humbling time” as it adjusts to changing demand dynamics brought on by the reopening of the economy. Peloton’s newly announced outlook for the fiscal-third quarter and the balance of its full fiscal year came in below expectations.

For the fiscal third quarter, Peloton expects $950 million to $1 billion in total revenue, as well as a loss of $125 million to $140 million on the basis of adjusted earnings before interest, taxes, depreciation, and amortization (Ebitda). Analysts tracked by FactSet were expecting $1.24 billion in revenue and an Ebitda loss of $28 million.

For Peloton’s full fiscal year, the company again slashed its outlook and now anticipates $3.7 billion to $3.8 billion in total revenue, below the lowered forecast for $4.4 billion to $4.8 billion that the company offered in early November. The FactSet consensus was for $4.1 billion in revenue.

The company also anticipates an Ebitda loss of $625 million to $675 million, whereas analysts had been projecting a $463 million loss on the metric. Peloton forecasts 3.0 million subscribers for its Connected Fitness offering by the end of the fiscal year, while the FactSet consensus was calling for 3.27 million.

“Our forecast extrapolates traffic trends from the first half of the year into the second and incorporates assumed demand impacts from reduced sales and marketing spend and the implementation of delivery and set-up surcharges on January 31st,” the company said in its shareholder letter.

As for Peloton’s latest financial results, the reported a fiscal second-quarter net loss of $439.4 million, or $1.39 a share, whereas it posted net income of $63.6 million, or 18 cents a share, in the year-prior quarter. Analysts tracked by FactSet were expecting a $1.20 loss per share on a GAAP basis.

Peloton also recorded a loss of $266.5 million on an Ebitda basis, whereas analysts surveyed by FactSet were looking for a $291.4 million loss on the metric. A year before, the company posted $116.9 million in positive Ebitda.

Revenue rose to $1.13 billion from $1.06 billion and roughly matched the FactSet consensus, which was for $1.14 billion.

The company had told investors back in January that it expected to record $260 million to $270 million in Ebitda losses for the December quarter as well as $1.14 million in revenue, so the metrics Peloton provided are in line with those preliminary expectations.

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