Will Peloton Become Profitable After Its Latest Move?
It has been a tough ride for Peloton Interactive (NASDAQ: PTON), whose shares have cratered 95% over the last year and a half. The pandemic was definitely good to the fitness innovator, as stuck-at-home consumers turned to convenient options to work out at home. But a reopening economy caused demand to fall and net losses to soar.
To help keep costs under control and improve the financial situation, management just announced that they will halt all in-house production of the company's exercise equipment and will instead rely solely on third-party manufacturers. This latest move has the potential to better position Peloton to be sustainably profitable sooner rather than later, something I'm sure investors desperately want.
In addition to suspending operations at Tonic Fitness Technology, a Taiwanese manufacturer that was acquired in Oct. 2019 for $48 million, and expanding its partnership agreement with Rexon Industrial, Peloton previously announced that it will sell the planned $400 million Ohio factory, called Peloton Output Park. Furthermore, this pivot calls into question what the company will do with its acquisition of Precor, which was purchased to boost manufacturing capabilities.
Source Fool.com
