Peloton Thrilled the Stock Market With Its $1 Billion Share Sale -- Here's Why
Connected exercise equipment company Peloton Interactive (NASDAQ: PTON) saw its shares soar by about 13% within hours of announcing a $1 billion secondary stock offering on Tuesday morning. The company's share price was taking a beating for weeks following disappointing fiscal first-quarter results, along with management alarmingly reducing guidance. Therefore, the stock's massive rally may look puzzling at first glance. After all, the company just announced it would dilute its shareholders while signaling its need for more cash than what its sales are providing. However, there is indeed a bullish undercurrent that the stock market correctly identified.
Regardless of the stock market's excitement over Peloton's equity offering, risks remain high for the online workout provider, and it will still need to take strong steps to secure a turnaround. In its fiscal 2022 first quarter, which ended Sept. 30, top-line growth was positive, driven by an increase in its overall subscriptions. However, the use of its app fell dramatically, and in its updated guidance, it slashed all of its most important previous estimates for fiscal 2022. It also continued generating net losses, and management anticipates even bigger bottom-line losses ahead.
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Source Fool.com
