Friday's Headlines: Peloton to Face Consumer Lawsuit
Here were the biggest movers in the MyWallSt shortlist yesterday:
Moving Up ⬆️
The New York Times (NYT) +10.6%
Lemonade (LMND) +6.1%
Baozun (BZUN) +5.4%
Nordstrom (JWN) +5.0%
Hain Celestial (HAIN) +4.8%
Moving Down ⬇️
Bumble (BMBL) -8.6%
2U (TWOU) -8.0%
Bill.com (BILL) -7.3%
Smartsheet (SMAR) -6.2%
Upstart Holdings (UPST) -5.3%
Here are the stories that you need to know ahead of market-open today, Friday the 12th of August.
Peloton to Face Consumer Lawsuit 👨⚖️
In court yesterday, U.S. District Judge Lewis J. Liman rejected Peloton’s (PTON) request to dismiss a lawsuit brought against it by consumers alleging they overpaid for a subscription.
The suit originated from a separate lawsuit brought against the company in 2019, in which Peloton fell foul of a copyright dispute. A number of publishers sued the company for using music in its workout classes without the proper licenses. While this case was settled in 2020, it resulted in Peloton removing a significant portion of its library of fitness classes.
With almost half of the classes removed from its library, the consumer lawsuit alleges that they were misled by Peloton about the amount of content that comes with a subscription and subsequently overcharged. The company’s argument that customers weren’t reliant on the misrepresented information before making their purchases was rejected by Justice Liman.
Down more than 60% year-to-date and almost 90% from all-time highs, it has been a torrid time for Peloton investors as a series of managerial missteps, and a huge ebb and flow of demand has left the company on its knees. New CEO Barry McCarthy was brought in to turn the company around and is already making his presence felt with plans to cease in-house manufacturing. A distraction like this will do little to make his job any easier.
Rivian’s Losses Almost Triple ⚡️
Electric vehicle (EV) manufacturer Rivian revealed its books to the world yesterday in its second-quarter earnings call, and by and large, it made for mixed reading. The company just about beat expectations, but a widening net loss and a trimmed full-year financial outlook soured the aforementioned beats.
Rivian posted a loss per share of $1.62 on revenue of $364 million, beating Wall Street estimates of a $1.63 loss and revenue of $337.5 million respectively. However, its net loss for the quarter came in at close to $1.7 billion — almost triple previous figures. Management put this down to a number of issues, with CFO Claire McDonough stating that “We’ve seen unprecedented levels of inflation, especially across our raw material inputs and lithium prices…We’ve also experienced increased costs in regard to our expedited freight expenses.”
While Rivian still expects to meet production numbers forecast earlier in the year — with 25,000 vehicles remaining the target — the firm’s financial forecast was cut. The company is now expecting a full-year loss of $5.4 billion — a significant increase from the $4.75 billion loss predicted in May.
This revision reflects the effects of higher material costs and freight expenses, as well as ongoing supply chain challenges.
With Rivian down just over 70% from all-time highs seen around its IPO in November 2021, change is undoubtedly needed to combat the harsh macroeconomic climate we find ourselves in. CEO RJ Scaringe has already committed to cutting 6% of its workforce while also slashing spending across the board to ensure goals are met without the need to raise any further cash. Whether or not these measures will be enough is yet to be seen.
Warby Parker Slashes Its Outlook 👓
Warby Parker announced its second-quarter earnings yesterday and, despite outperforming on earnings and meeting expectations for revenue, was still forced to cut its outlook for the remainder of the year.
The glasses manufacturer posted a loss per share of one cent where a loss of two cents was expected. It also posted revenue of $149.6 million, largely in line with what Wall Street had forecast. Full-year outlook has been slashed from a previous range of $650 million to $660 million, to a reduced range of $584 million to $595 million. Despite this reevaluation, Warby Parker stock soared by over 19% yesterday, with investors seemingly buoyed by narrower-than-expected losses.
Chief financial officer Steve Miller outlined that the company is facing an “uncertain macroeconomic environment” and that it's having to adopt a “disciplined approach to managing costs to set us up for sustainable growth and profitability.
Warby Parker was an early player in the eyewear e-commerce space. By delivering exceptionally well-designed eyewear to its customers at very affordable prices, it carved out a solid portion of the market share as consumers looked for an alternative to expensive designer brands.
Warby Parker boasts an incredibly loyal customer base. Its net promotor score of 80 is testament to this, while incentives like its Buy a Pair, Give a Pair program — which has given over 10 million pairs of glasses to people in need — make sure that customers are happy to return.
However, with its stock down over 63% this year alone, and over 70% from all-time highs, more work is needed to reverse the slide the company has been on of late.