Stocks end mixed after see-saw session; it's still an uphill ride for Peloton

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Stocks turn mixed day after big sell-off

NEW YORK (AP) — Stocks ended mixed on May 10, stabilizing a day after a sharp drop that brought the market to its lowest point in a year.

The S&P 500 wound up 0.2 percent higher after another wobbly trading session that included a gain of 1.9 percent and a drop of as much as 0.8 percent.

Gains by big technology stocks, which have been swinging sharply both up and down recently, helped counter losses elsewhere in the market. The Nasdaq rose 1 percent and the Dow Jones Industrial Average fell 0.3 percent. The yield on the 10-year Treasury fell to 2.99 percent.

The market’s see-saw action came ahead of the release of the Labor Department’s consumer price index, a key economic report on inflation that investors will be closely watching as they try to gauge how aggressively the Federal Reserve will raise interest rates as it fights inflation.

Economists expect the index eased to 8.1% in the 12 months ended in April. That would mark the first annual decline since August.

“If inflation is a lot lower, as they’re expecting it to be, then we may very well see the markets rally because perhaps people think the Fed won’t hike as much or as aggressively,” said Randy Frederick, managing director of trading and derivatives at Charles Schwab.

Peloton’s woes worsen as habits change

NEW YORK — Peloton’s uphill ride to get more sales is getting rougher as more people return to gyms and other pre-pandemic exercise routines and embrace cheaper options.

The maker of high-end exercise bikes and treadmills, once highflying in the early days of the pa

 demic, on reported mounting losses and slowing sales on May 10. It also offered a bleak sales outlook for the current quarter and said it had signed a commitment to borrow hundreds of millions of dollars, raising questions for some investors about the chances of a turnaround.

“Peloton has a lot of work to do to convince investors that the business model still works,” said Neil Saunders, managing director of GlobalData Retail. ”It’s coming off a high. People were at home and wanted to stay fit. But now people are starting to go back to the gyms. They want the social aspect.”

The maker of high-end exercise bikes and treadmills thrived during COVID-19 outbreaks and sales growth for the company doubled in 2020 and surged 120 percent in its last fiscal year. The arrival of effective vaccines and easing COVID-19 restrictions, however, have opened up more options for Americans seeking exercise and Peloton has suffered. In February the company announced a major restructuring and abandoned plans to open its first U.S. factory, which would have employed 2,000 workers in Ohio. Co-founder John Foley stepped down as CEO and the company said it would cut nearly 3,000 jobs.

The data released May 10 raised more questions about how the company will move forward. The company signed a binding commitment letter with JP Morgan and Goldman Sachs to borrow $750 million. CEO Barry McCarthy said in a letter to shareholders that Peloton ended the quarter with $879 million in cash, “which leaves us thinly capitalized for a business of our scale.”

McCarthy said the company has to rethink its capital structure as it pushes to expand its subscriber base to 100 million.

McCarthy’s letter emphasized again the company’s push to focus more on the digital app and less on sales of bikes and treadmills.

Pfizer buys migraine treatment marker for 11.68B

NEW YORK — Pfizer is starting to put its COVID-19 cash influx to use by spending $11.6 billion to venture deeper into a new treatment area.

The vaccine and cancer drug maker said May 10 it will use cash on hand to buy the remaining portion of migraine treatment developer Biohaven Pharmaceutical it does not already own. 

Pfizer Inc. brought in more than $14 billion in sales during the recently completed first quarter from its COVID-19 vaccine Comirnaty and its new pill treatment for the virus, Paxlovid.

Most of that came from Comirnaty, which also rang up nearly $37 billion in sales last year. But revenue from Comirnaty, which Pifzer developed with BioNTech, is expected to fade in the coming years. Pfizer also faces the loss of patent protection for some key products in its broad portfolio over the next decade.

The drugmaker currently has no migraine treatments.

U.S. regulators approved Nurtec ODT for treating migraines in February 2020 and for preventing them about a year ago. The drug is sold as Vydura in the European Union. It brought in nearly $124 million in sales in the first quarter. Biohaven expects $825 to $900 million in product sales this year.

Pfizer plans to put its marketing muscle into the drug with potential launches for it in 70 countries.

Sony profit jumps on broad-based growth

TOKYO — Sony’s fiscal fourth quarter earnings surged 67 percent to about $850 million, compared to the previous year, as the Japanese entertainment and electronics company racked up profits in video game and movie divisions.

Sony’s January-March quarterly sales edged up 1 percent, as its music operations also did well, boosted by the popularity of streaming services.

For the full fiscal year ended in March, Sony racked up a profit of $6.8 billion, down 14 percent despite the success of “Spider-Man: No Way Home,” which contributed to revenue. Sales in its TV division also grew from licensing income.

Sales in its TV division also grew from the licensing income of “Seinfeld” and other titles, Sony said.

Finance chief Hiroki Totok said income from movie theaters was returning lately to levels recorded prior to the COVID-19 pandemic.

Nintendo gain dips as console sales slow

TOKYO — Nintendo’s profit for the fiscal year ended in March was little changed from the previous year, edging down 0.6 percent to about $3.7 billion.

The video game maker behind the Super Mario and Pokemon franchises said May 10 that sales for the fiscal year fell 3.6 percent as fewer Nintendo Switch machines were sold, and IP income from mobile content also declined.

Nintendo Switch players around the world now total some 102 million, up from 87 million the previous fiscal year, according to the company.

Tesla recalls cars over faulty screens

DETROIT — Tesla is recalling about 130,000 vehicles across its U.S. model lineup because the touch screens can overheat and go blank.

The recall covers certain Model S sedan and Model X SUVs from 2021 and 2022, as well as Model 3 cars and Model Y SUVs from 2022.

Documents posted May 10 by the National Highway Traffic Safety Administration said that during the fast-charging process, the central processing computers may not cool sufficiently. That can cause the computer to lag or restart, making the center screen run slowly or appear blank. Without the center screen, the cars can lose rearview camera displays and settings that control windshield defrosters, increasing the risk of a crash.

Tesla is fixing the problem with online software updates that began on May 3.

Amazon fires 2 organizers tied to NY union

NEW YORK — Amazon has fired two employees with ties to the grassroots union that led the first successful U.S. organizing effort in the retail giant’s history.

The company confirmed May 10 that it fired Michal “Mat” Cusick and Tristan Dutchin of the Amazon Labor Union in New York. It said the cases were unrelated to each other and unrelated to any cause or group the two support.

Cusick said he was fired for COVID-related leave after receiving conflicting messages from the company about when the leave period ended. Amazon spokesperson Kelly Nantel says Cusick failed to show up for work after the leave ended in April and Dutchin failed to meet productivity goals. Dutchin did not respond to a request for comment.

Musk ‘aligned’ with EU bloc tech rules

LONDON — Elon Musk, who’s offering to buy Twitter, has given his support to a new European Union law aimed at protecting social media users from harmful content after he met with the bloc’s single market chief.

In a video tweeted late May 9 by EU Internal Market Commissioner Thierry Breton, Musk said the two had a “great discussion” and he agrees with the bloc’s online regulations.

Breton said May 10 that he outlined to Musk how the law aims to uphold free speech while also making sure whatever is illegal “will be forbidden in the digital space,” which Musk “fully agreed with.”

Peloton’s uphill ride to get more sales is getting rougher as more people return to gyms and other pre-pandemic exercise routines and embrace cheaper options.

The maker of high-end exercise bikes and treadmills, once highflying in the early days of the pandemic, on Tuesday reported mounting losses and slowing sale. It also offered a bleak sales outlook for the current quarter and said it had signed a commitment to borrow hundreds of millions of dollars, raising questions for some investors about the chances of a turnaround.

“Peloton has a lot of work to do to convince investors that the business model still works,” said Neil Saunders, managing director of GlobalData Retail. ”It’s coming off a high. People were at home and wanted to stay fit. But now people are starting to go back to the gyms. They want the social aspect.”

The maker of high-end exercise bikes and treadmills thrived during COVID-19 outbreaks and sales growth for the New York City company doubled in 2020 and surged 120% in its last fiscal year.

The arrival of effective vaccines and easing COVID-19 restrictions, however, have opened up more options for Americans seeking exercise and Peloton has suffered. In February the company announced a major restructuring and abandoned plans to open its first U.S. factory, which would have employed 2,000 workers in Ohio. Co-founder John Foley stepped down as CEO and the company said it would cut nearly 3,000 jobs.

Peloton ramped up fast during the pandemic, increasing its subscriber base from 700,000 to 3 million, but that growth has slowed, and company misjudged the slowing demand and continued to churn out expensive hardware, creating a sizeable inventory of unsold stationary bikes.

Peloton’s initial success also created competition, with companies peeling away customers by selling cheaper connected stationary bicycles and exercise equipment. High-end gyms also jumped into the game, offering virtual classes that once were Peloton’s biggest draws.

The data released Tuesday raised more questions about how the company will move forward.

The company signed binding commitment letter with JP Morgan and Goldman Sachs to borrow $750 million. New CEO Barry McCarthy said in a letter to shareholders that Peloton ended the quarter with $879 million in cash, “which leaves us thinly capitalized for a business of our scale.”

McCarthy said the company has to rethink its capital structure at the same time that it pushes to expand its subscriber base to 100 million.

McCarthy’s letter to shareholders emphasized again the company’s push to focus more on the digital app and less on sales of bikes and treadmills.

Among other strategies: rolling out a test where customers pay a flat rate to rent Peloton’s stationary bikes and get access to on-demand workout classes. It also wants to broad its distribution by selling Peloton produced through other retailers.

“Turnarounds are hard work,” McCarthy said in a letter to shareholders. “It’s intellectually challenging, emotionally draining, physically exhausting, and all consuming. It’s a full contact sport.”

That, according to UBS analyst Arpiné Kocharyan, would mean paying more to land customers compared with focusing on selling stationary bikes. After a cash flow burn of $747 million in the most recent quarter, Kocharyan believes that will lead to heightened concern about the cash Peloton has to work with.

Saunders said that Peloton faces a tough battle in reworking its business, especially in the app area. He pointed to companies like Apple, which is investing extensively in its own fitness solutions. And he also said big brands like Lululemon are pivoting more toward classes and services.

Peloton Interactive Inc. lost $757.1 million, or $2.27 per share, for the three months ended March 31. Stripping out nonrecurring items, it lost 98 cents per share, outpacing projections of a per-share loss of 85 cents, according to a survey by Zacks Investment Research.

The loss was far greater than last year when Peloton was $8.6 million in the red.

Revenue slid 15% to $964.3 million, which was also short of analyst projections.

Peloton said it’s looking at revenue this quarter to come in between $675 million and $700 million. That too soured investors in early trading. Industry analysts had been projecting fourth-quarter revenue of $820.3 million, according to FactSet.

Shares, which have already fallen more than 60% this year, fell $1.57 to $12.56. At their peak, shares of Peloton cost as much as $171.