Peloton Stock Recovery or Acquisition Prediction

Market doesn’t like the multiple

Yeah, right. This seems like the kind of message that an incoming CEO comes up with after extensive consultation with highly paid PR people. And usually this message is the opposite of what is really going on. After all, what CEO takes over a troubled company and proclaims that their strategy is to sell it? That’s a guaranteed way to depress any sale price. As for the significance of McCarthy moving across the country for the job, there is none. Does anyone imagine McCarthy is packing up a U-Haul and personally driving a household of furniture from California to New York? Of course not. He can easily rent an apartment and fly back to California whenever he wants. McCarthy was based in New York before, when he was CFO of Spotify, and he magically found his way home to California after he retired. We’re not in the 19th century, where moving across the country was a major logistical exercise. The truth is that McCarthy, who is 68 years old, is unlikely to be running Peloton in five years’ time. But before he sells the company, he has to put on a good show of trying to turn it around so he can strike a harder bargain with Apple, Amazon or whoever else might be looking at it. At least shareholders should hope that’s the case. McCarthy’s stated strategy of focusing on content looks a little risky. While there are surely some subscribers to Peloton’s fitness classes who don’t own any hardware, going too hard after that market would simply pit Peloton more directly against the wide array of companies offering fitness classes—which includes Apple, Amazon, Beachbody and YouTube. Peloton is not Netflix. Creating content for fitness classes doesn’t require signing big-name stars, which means the barriers to entry are low. McCarthy, given his experience, knows that. He is sending a message that he won’t be a pushover for buyers. But don’t confuse that message with the reality that Peloton is a sale waiting to happen.