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Peloton’s Crash Keeps Getting Worse As Shares Plunge Nearly 20% After $1.2 Billion Loss

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Topline

Shares of Peloton, a pandemic-era stock darling, tanked nearly 20% on Thursday after reporting a sixth consecutive quarter of losses, as the at-home fitness company continues to struggle with declining sales and excess inventory.

Key Facts

Peloton’s stock fell more than 18% to $11 per share following the dismal earnings release, which showed the fitness company took a $1.2 billion loss in the latest quarter, in part due to “restructuring charges related to inventory and supply chain issues.”

The declines come just a day after the stock jumped more than 20% thanks to the announcement of a new partnership with Amazon to sell Peloton’s exercise bikes, its first big deal with another retailer.

Peloton’s quarterly revenue came in at around $679 million, a 28% decline from nearly $937 million a year ago and short of the $718 million expected by analysts, according to Refinitiv data.

The at-home fitness company’s disappointing quarterly earnings fell well short of Wall Street forecasts as sales continued to decline and losses widened, with Peloton warning that its business could continue to struggle amid “broader macroeconomic uncertainties.”

Peloton, which ended the quarter with nearly 3 million connected fitness subscriptions, is now forecasting that number to stay flat in the current quarter, predicting revenue of between $625 million and $650 million.

CEO Barry McCarthy, who took the top job in February, said in a shareholder letter that there has been “steady progress” with efforts to turn around the business, though there is still “work to do” as the company seeks to reach break-even cash flow in the second half of 2023.

Crucial Quote

“The naysayers will look at our financial performance and see a melting pot of declining revenue, negative gross margin and deeper operating losses,” McCarthy wrote to Peloton shareholders. “But what I see is significant progress driving our comeback and Peloton’s long-term resilience.”

Key Background

Peloton surged in popularity during pandemic-era lockdowns as people stuck at home flocked to their exercise bikes, with its stock rising nearly 400% in 2020. Shares have since struggled, however, falling over 75% in 2021 as sales slowed with customers returning to gyms. The company has been attempting to turn around its business with strategic initiatives and cost-cuts under CEO Barry McCarthy, a former Netflix and Spotify executive who has been at the helm since February. Peloton shares are still way down this year, plunging over 68% as investors have ditched high-growth tech companies amid the wider market selloff. Other pandemic-era stock darlings like Zoom, Teladoc and Roku have also tanked in 2022, each losing more than 60%.

What To Watch For

“There’s really not much to get super excited about with this report,” says Vital Knowledge founder Adam Crisafulli, although he adds that cash flow and earnings numbers are “moving in the right direction (albeit not as quickly as investors hoped).” Despite some progress, “the bar is super low with this company, which is a tailwind for the stock, but in general this is an underwhelming print,” Crisafulli argues.

Further Reading

Peloton Launches Sales On Amazon—Shares Jump 17% (Forbes)

Peloton Shares Plunge As CEO Warns Fitness Company Is ‘Thinly Capitalized’ (Forbes)

Zoom Shares Sink 15% After ‘Concerning’ Earnings Miss, Analysts Downgrade The Stock (Forbes)

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