Don’t be fooled by Peloton’s “Turnaround”.

If you wanted to know what basic expectations look like, take a look Platoonhis (PTON 6.37%) the latest quarterly report. The connected fitness company, rudderless after former CEO Barry McCarthy left in May, managed to snap a streak of revenue declines and narrow its net loss. Analysts had expected a significant drop in sales and a much larger loss, and the stock responded by rising as much as 30% on Thursday.

The story, however, has not changed. The company is run by two of its board members for now, and aggressive cost-cutting acts as a substitute for a real long-term strategy. Cost cutting is certainly necessary given the excess built up during the company’s pandemic-era heyday, but where the revenue growth is supposed to come from remains a mystery.

Revenues are still falling

Peloton managed to increase its revenue by 0.2% year over year in the fourth quarter, its first quarter of growth in more than two years. Unfortunately, this is not the start of a trend. The company expects revenue to decline 4% year-over-year in the first quarter of fiscal 025 and 9% for the full fiscal year.

Part of the reason for the weak guidance is that the company is now focused on profitability rather than growth. Here’s the problem: Peloton has a market cap of about $1.6 billion as of midday Thursday, and that valuation is hard to justify if a return to revenue growth is years away at best.

Peloton expects to produce about $2.45 billion in revenue in fiscal 2025. Revenue from connected fitness products will decline, and the company is also seeing a decline in subscribers.

Subscription problems

Peloton has two distinct subscription businesses. First, there’s the connected fitness subscription product, which is tightly coupled with the company’s bikes and treadmills. Second, there’s the standalone app that doesn’t require the purchase of Peloton hardware. Neither is going well.

Peloton expects subscribers for its connected fitness product to fall 9% in fiscal 2025 and its app subscribers to fall 3%. The company needs to sell more equipment to increase connected fitness subscription revenue, but it doesn’t. Absorption is relatively low, but the membership base is still in decline as equipment sales deteriorate.

The app subscription business has a much higher frequency, which makes sense because it’s not tied to an expensive exercise bike. Peloton is hemorrhaging app subscribers, losing 26% of its subscriber base year over year in the fourth quarter.

The company’s plan is to improve the subscriber experience in hopes of lowering its rate, though it’s making no promises. “While we are optimistic that we can improve engagement through product and content innovation and the evolution of our marketing strategy, the timing of when we will begin to see significant benefit from these efforts is uncertain,” the fourth-quarter letter to shareholders said.

Not an appealing comeback story

It’s hard to imagine a future where expensive Peloton home exercise equipment comes back into fashion. There’s a lot more competition today, and the pandemic-era wind of people avoiding gyms and classes is long gone.

The app subscription business was a huge disappointment. Peloton expects to end fiscal 2025 with about 600,000 app subscribers, down from 620,000 at the end of fiscal 2024. The company is struggling to sell gear while also struggling to attract non-gear subscribers to its cost-effective app reduced.

Peloton needs a new CEO and a new strategy. Without either, betting on a comeback is a risky proposition.