One of the pandemic’s biggest winners has admitted that the hypergrowth good times are coming to an end. Peloton Interactive signalled after hours on Thursday that its lockdown boom will slow down, and the stock was pounded in after-hours trading.
Markets are predicting that the share price will crash nearly 10% when trading begins on Wall Street at 2.30pm UK time. That would imply a stock price of $104.29, valuing the business at roughly $31 billion.
Putting that into context, on Christmas Eve the stock hit a record $162.72. It began 2020 at just over $30.
WHAT THE COMPANY SAID
Peloton reported fourth-quarter losses of $313.2 million, or $1.05 a share, after reporting earnings of $0.27 a year ago. Peloton had warned about effects of its treadmill recall in its last earnings report, but still lost much more than expected.
Analysts on average were predicting a loss of $0.44 a share.
Sales continued to grow, hitting $937 million, up from $607 million a year ago and topping the average analyst estimate of $929 million.
For the full fiscal year, Peloton more than doubled sales, topping $4 billion after putting up $1.83 billion in the previous year and failing to clear $1 billion in revenue the year before.
PREDICTIONS PRESSURE
Peloton predicted that first-quarter sales would be around $800 million, less than every quarter of the just-completed year. Analysts on average were calling for more than $1 billion in quarterly sales.
Peloton’s full-year sales forecast is more in line with analysts’ expectations, with annual guidance of $5.4 billion in sales (versus consensus $5.25 billion), but also predicts a loss on an adjusted basis for the full year. Analysts on average were predicting earnings $0.48 a share for the year.
Peloton’s margins might be an issue as well, with executives announcing that they will slash $400 (presumably £400 in the UK) off the price of the company’s core exercise-bike, to $1,495.
EXPERT VIEW
So where does this leave Peloton? A lot of people will have become accustomed to using its services during lockdown and may stay loyal as there is a convenience factor of being able to work out at home rather than go to a sweaty gym, observed Russ Mould, investment director at platform AJ Bell.
But picking up new customers will be a bit harder. Once it has lured people in, the goal is to sit back and enjoy recurring revenue from subscription income.
‘Taking drastic action to get more people onto its books might therefore explain why it has slashed prices by quite some margin.’
