Endurance run
Falling off the bike at Peloton
Good morning, fitness fanatics. This is your Stock Market Rundown for June 5th, 2024. Thanks for joining me. Let’s dig in:
TODAY’S TOP STORY: SHIFTING GEARS
When it comes to investing, do you want to bet on the jockey or the horse? What matters more for a stock—a top-flight management team, or a high-quality operation?
Well, as Warren Buffett once quipped: “Good jockeys will do well on good horses, but not on broken-down nags.” Even a crackerjack CEO with A+ qualifications may find himself hitting the curb teeth first, if he’s put at the helm of truly crappy business.
Example: Peloton. Back in early 2024 I told you about the fitness equipment-maker’s efforts to reinvigorate itself after a post-pandemic sales stall. Since then, things haven’t exactly raced forward.
Peloton’s CEO for the past two years, Barry McCarthy, came with gold-plated credentials: his previous jobs were C-level roles at Spotify and Netflix. Silicon Valley resumes don’t get much better, and Peloton lured him out of retirement with a nine-figure pay package.
But turnarounds are a tough gig, and Peloton’s revenue hasn’t stopped sliding. Things are getting desperate, with the company launching a fifth round of layoffs and refinancing its debt to avoid running out of cash.
Now, the board’s patience has run out: McCarthy is stepping down, and the company is in search of a new CEO.
Over McCarthy’s tenure, Peloton’s per-share stock price slid from $30 to $3—proof that a good leader can’t outpace a bad business. The next CEO should beware: when it comes to executive longevity, Peloton is more dangerous than downhill mountain-biking without a helmet.
SO WHAT ELSE IS GOING ON?
TikTok: cute social app, or Chinese spy operation? The courts will decide. While TikTok waits on an appeal of its banning by the US government, it’s working on a clone of its algorithm.
The American consumer may be worried about losing her job, but she hasn’t stopped moisturizing and exfoliating. Cosmetics retailer Ulta Beauty beat estimates, boosted by demand for affordable skincare products.
Nobody enjoys bull markets more than Robinhood, the trading app that became famous for letting youthful speculators YOLO into meme stocks. Robinhood is so flush with cash, they just announced a $1 billion share buyback plan.
Hormel Foods missed expectations on weak sales. Maybe they need to innovate… I can’t remember the last time I bought Dinty Moore Beef Stew.
That concludes our day, gang. Let’s rise and shine together again tomorrow. Yours in capitalism, The Axe
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