For his final "Executive Decision" segment of Wednesday's Mad Money program, Jim Cramer checked in Barry McCarthy, president and CEO of Peloton Interactive (PTON) , the connected fitness provider that's been on a wild ride, leading to McCarthy taking the helm from its founder.
McCarthy said there are a lot of similarities between Peloton and his prior employers, Netflix (NFLX) and Spotify (SPOT) . All three are founder-led companies, in the content business, and with global opportunities in front of them. He said there is a global market for Peloton, they just need to decide where they want to focus their efforts first.
Peloton currently has 2.7 million subscribers paying $40 per month, McCarthy noted, and he feels there's an opportunity to increase their total addressable market by lowering the upfront cost of the machines and focusing on features, functionality and content.
When asked about the company's previous troubles, McCarthy admitted that Peloton didn't manage itself well during the pandemic, and the lack of forecasting abilities led to increased cash needs. Now, however, McCarthy said he feels Peloton was adequately capitalized given the inventory they already have.
"There's a lot of talent in the building," McCarthy concluded, and while he will always be wary about competition, he expects Peloton will remain the dominant player in the connected fitness space.
Let's take a spin on the charts and indicators. In our last review of PTON on January 14, we wrote that "In our November 29 review wrote, 'In our November 5 review of PTON, we recommended that Don't fight the downtrend. Do not try to pick a bottom. Continue to avoid the long side but also continue to exercise.' PTON might bounce to the upside a little but without a bottom formation, prices are more likely to sink still lower in the months ahead. Continue to avoid the long side. We will stick to our bearish strategy - continue to avoid the long side."
In this updated daily bar chart of PTON, below, we can see that prices have been bruised and beaten for months. PTON is trading below the declining 50-day moving average line and well (extended) below the declining 200-day moving average. The two very noticeable volume surges in recent weeks could be a "throw in the towel" event.
The On-Balance-Volume (OBV) line shows a decline from June to the middle of January followed by a quick and short "pop" to the upside. Strangely, the Moving Average Convergence Divergence (MACD) oscillator has been improving since November and is back to the zero line.
In this weekly Japanese candlestick chart of PTON, below, we can see a slight "hint" at improvement. As you look over the chart you can see a fair amount of large red (bearish) candles. More recently the candles are still red but the size of the real bodies - the distance from the open to the close - are small and suggest that bulls and bears are more in balance.
The long decline in the OBV line may have stopped in January. The MACD oscillator is turning up for a cover shorts buy signal.
In this daily Point and Figure chart of PTON, below, we can see that the software is projecting a potential downside price target in the $12 area. Ouch.
In this weekly Point and Figure chart of PTON, below, we can see that prices met and exceeded a downside target of $65.
Bottom line strategy: The worst of the damage is probably now behind us. Our strategy of avoiding the long side has worked, but what next? Patient investors who believe that PTON can make a fundamental turnaround could probe the long side of PTON risking to $19. Improvements are not going to happen overnight so there is no rush to be a buyer.