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Peloton Is Down By 15%, Here Is Why

By:
Vladimir Zernov
Published: May 10, 2022, 14:58 UTC

Traders focused on the weak guidance for the next quarter.

Peloton store exterior in upscale outdoor shopping center.

In this article:

Key Insights

  • Peloton’s quarterly report serves as an additional bearish catalyst for the company’s stock as guidance disappoints. 
  • Subscription growth is slowing down, while revenue from hardware sales is falling due to lower prices. 
  • There are no signs of a turnaround, so the stock is under strong pressure. 

Peloton Stock Falls After Quarterly Results

Shares of Peloton gained strong downside momentum after the company released its quarterly results. The company reported total revenue of $964.3 million and GAAP loss of $2.27 per share. Connected Fitness Products revenue was $594.4 million, while subscription revenue totaled $369.9 million.

Traders focused on the company’s outlook for the next fiscal quarter. Peloton expects that Connected Fitness Subscriptions will increase from 2.96 million to 2.98 million.

Total revenue is expected to decline from $964 million to $675 million – $700 million. The company commented: “Our Q4 outlook reflects softer demand vs. our February forecast, partially offset by accelerated sales we’ve seen as a result of our recent hardware price reductions”.

Not surprisingly, the market did not like the company’s guidance, and the stock made an attempt to settle below $11.50.

What’s Next For Peloton Stock?

A recent Wall Street Journal report indicated that Peloton was searching for investors that could be willing to buy a 15% – 20% stake in the company. The quarterly report shows why Peloton wants to raise more cash.

The company’s business is struggling, and its fiscal fourth quarter revenue is expected to fall by 27% on a year-over-year basis. Analysts do not expect that Peloton will be able to become profitable anytime soon, so the company’s management needs to come up with a credible turnaround plan.

At this point, the market does not believe that such a plan exists. Subscriptions growth has stalled, while hardware sales revenue is under pressure as the company has to offer lower prices to attract new consumers. Peloton will need to come up with strong positive catalysts to break the current downside trend.

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About the Author

Vladimir is an independent trader and analyst with over 10 years of experience in the financial markets. He is a specialist in stocks, futures, Forex, indices, and commodities areas using long-term positional trading and swing trading.

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