What Happened?

Shares of exercise equipment company Peloton (NASDAQ:PTON) jumped 28.3% in the morning session after the company reported impressive third-quarter earnings. EBITDA handily beat Wall Street's estimates. In addition, Peloton's optimistic EBITDA forecast for the next quarter blew past analysts' expectations. On the other hand, its revenue guidance for next quarter came in slightly below Wall Street's estimates. Separately, the company announced Peter Stern, as CEO and President effective January 1, 2025. Mr Stern previously served as President of Ford Integrated Services and also held leadership roles at Apple and Time Warner Cable. Zooming out, we think this was a strong quarter with hopes for renewed optimism under the new leadership.

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What The Market Is Telling Us

Peloton’s shares are extremely volatile and have had 62 moves greater than 5% over the last year. But moves this big are rare even for Peloton and indicate this news significantly impacted the market’s perception of the business. 

The previous big move we wrote about was about a month ago when the stock dropped 6.6% as the major indices declined (Nasdaq down 1.8%, S&P 500 down 0.9%) amid rising geopolitical tensions in the Middle East. NBC News reported (citing White House and Defense Department officials) that the U.S. "has indications that Iran is preparing to imminently launch a ballistic missile attack against Israel." 

Separately, Fed Chair Jerome Powell told investors there is no "preset course" regarding the pace of future rate cuts. He added in a speech delivered to the National Association for Business Economics, "Looking forward, if the economy evolves broadly as expected, policy will move over time toward a more neutral stance. But we are not on any preset course." 

While the markets could still be right about more rate cuts in the near term, Powell's comments added uncertainty to both the cadence and magnitude of cuts. Following these updates, the VIX index (or fear gauge) spiked as the reports created more uncertainty, which investors certainly don't like.

Peloton is up 43.6% since the beginning of the year, and at $8.38 per share, has set a new 52-week high. Investors who bought $1,000 worth of Peloton’s shares 5 years ago would now be looking at an investment worth $351.01.

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