Tech Growth Not Growing
Peloton (PTON), the glamorous fitness-bike-with-a-tablet company, is going through a gut-churning 4th round of job cut this year.
I call this bad management, because it is.
If a company is going to cut jobs, get it over with one sharp cut of the sword, otherwise, the wounds don’t start to heal.
I can’t imagine how low company morale is in the virtual offices of Peloton as the tech firm lurches from one round of job cut to the next.
It’s hard to understand how anybody gets anything done at Peloton because they are too busy going under company review.
The extra cherry on top for this 4th job cut is the CEO has told us the company has 6 months to prove it can survive as a standalone company.
This is again poor management as it essentially signals to workers to find an imminent backup plan before the rate hikes destroy all job openings.
Yes, there is a name that goes with this dark face and that is CEO Barry McCarthy.
The genius management is one of the big reasons why the stock is down 75% so far this calendar year.
Peloton’s recent strategic changes have sparked speculation that it could be looking to sell itself, but at this point, it’s only worth pennies on the dollar from what it once was at the height of late 2020 and early 2021.
That was when Peloton was strutting around like it could no wrong.
They had the hot product but unfortunately failed to capitalize on their head start.
Head starts don’t last long for marginal firms or in the tech world for that matter.
It only takes months for other tech firms to iterate mediocre products into their lineup and PTON let the short-term success get to their head.
Even more surprising was the overconfident nature of the management when they were still a massively loss-making operation.
My recommendation would have been to roll into a more stable cash flow business during the arbitrary lockdowns, but no, PTON is still an analog company when others have gone digital.
They are still selling the same Podunk stationary bike when the smart consumer figured it out by purchasing a stationary bike themselves and installing a tablet stand.
If you want to argue that the PTON exercise classes were worth the subscription then I would also say a smart consumer can just exercise themselves with a timer and self-selected music.
Small backwater firms only get 15 minutes of fame once in a lifetime, yet management did little to launch them into a more stable operational situation and they lost $1.2 billion just last quarter.
Taking a step back, growth tech has been crushed by these interest rate hikes and only the holy grail of tech products is surviving at this point.
Before, zombie firms used to be able to go back to the debt markets to kick the can down the road, but not anymore as loan costs have soared.
No more excesses fueled by cheap capital – it's sink or swim time.
Clearly, management didn’t get the memo and I don’t see growth tech reversing until we are further through the rate rise cycle and debt servicing costs become lower.
