Peloton's new CEO has one not so secret mission: analyst

4 months ago 97
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Peloton's new CEO Barry McCarthy has one job that could be summed up as follows after chats with folks on Wall Street: clean up company, present company for eating by someone with a large appetite.

"I don't think Barry is looking to work 100 hour weeks at this company. I think this was a way for CEO John Foley to kind of save face. He still has 40% super voting stock," said Oppenheimer analyst Jason Helfstein on Yahoo Finance Live.

Helfstein — who covers Peloton (PTON) for the firm's clients — says McCarthy is being brought into stabilize Peloton's fundamentals.

Once McCarthy does that — and considering Peloton's strong brand name — Helfstein thinks Peloton will "probably get sold."

McCarthy, 69, is known on Wall Street circles as the innovative architect of Spotify's 2018 direct listing. At Spotify, he was CFO for several years before retiring in 2019. He is seen as having a major passion for the numbers, in part reflecting his long-time serving as Netflix CFO. McCarthy has also been a board member of delivery startup Instacart for over a year.

A person familiar with McCarthy's time at Spotify tells Yahoo Finance, McCarthy has extensive knowledge of subscription-based business models (which Peloton has), but respects the need to spend on content.

McCarthy's résumé and stature suggests Peloton isn't interested in selling itself until Mr. Fix It addresses the company's finances and could fetch a better valuation than currently depressed levels.

Peloton declined to make McCarthy available for an interview with Yahoo Finance.

McCarthy will have to try to win over an activist investor who is still taking swings at Foley and demanding the company be sold.

“Peloton CEO John Foley naming himself Executive Chairman and hiring a new CFO does not address any of Peloton investors’ concerns. Mr. Foley has proven he is not suited to lead Peloton, whether as CEO or Executive Chair, and he should not be hand-picking directors, as he appears to have done today," Blackwells Chief Investment Officer Jason Aintabi said in a new letter Tuesday.

Blackwells holds about 5% of Peloton's outstanding shares.

In a new 65-page presentation, the activist lists 12 potential buyers for Peloton. The most credible names include Disney, Apple, Amazon and Nike. Aintabi thinks Peloton could be worth $65 to $75 a share in any deal. The stock currently trades around $35.

"A stand-alone Peloton cannot achieve its full potential given: (1) Lack of management capability and credibility; (2) A stressed balance sheet and ongoing significant cash burn; (3) It will take years of operational restructuring, organizational redevelopment and positive results for the company to regain investor confidence and multiple expansion," the presentation said.

Peloton didn't return Yahoo Finance's request for comment on Aintabi's letter.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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