Exercise equipment maker Peloton (NASDAQ:PTON) is refinancing its debt as softness in demand and margin headwinds have weighed on its revenue and cash. The company plans to offer $275 million in convertible senior notes due 2029 in a private offering. Moreover, it will enter into a $1 billion five-year term loan facility and a $100 million five-year revolving credit facility.
Peloton intends to use the proceeds of the offering and the new credit facilities to repurchase approximately $800 million of its convertible senior notes due 2026. Further, it will refinance its existing term loan and revolving credit facilities.
Refinancing Debt: A Positive Step for Peloton
This refinancing will help Peloton extend its debt maturities and provide additional time and liquidity to restructure its business and reignite growth. According to the TipRanks Stock Analysis tool, “Bulls Say, Bears Say,” analysts bullish on PTON believe the company’s strategy of refinancing its debt could improve its balance sheet.
PTON Focused on Lowering Costs
Peloton stock is down about 47% in one year, eroding shareholders’ value. Lower demand and price cuts to support sales volumes have negatively impacted the company’s revenue, profits, and cash flow.
Nonetheless, the company announced a new restructuring program during the Q3 conference call to reduce its annual expenses by more than $200 million. The company plans to boost its cash flows with cost reductions, which include job cuts.
Operationally, Peloton is reducing its retail showroom footprint, improving its go-to-market approach, and optimizing and consolidating resources to focus on growth. These initiatives will help PTON achieve positive free cash flow.
Is Peloton a Buy, Hold, or Sell?
Given the softness in demand and uncertainty regarding the turnaround of its business, analysts remain sidelined on PTON stock.
It has three Buy, 11 Hold, and two Sell recommendations for a Hold consensus rating. These analysts’ average price target on PTON stock is $4, implying 2.30% upside potential from current levels.
