While there were quite a few stocks that plummeted significantly over the course of Wednesday’s trading session, one of the more notable ones was a closely watched fitness subscription provider. Peloton (NASDAQ: PTON) fell significantly in after-hours trading when the company announced its third-quarter fiscal results, which fell significantly short of what Wall Street was expecting despite some solid growth figures.
Since going public back in September, the company has seen its quarterly losses grow to $55.4 million, in comparison to the $55.1 million loss it reported back in the previous year. This breaks down to a 20 cent per share loss, which is actually better than the 36 cent loss per share expected by analysts. Revenue figures had also grown by an impressive 77%, growing from $262.9 million last year to $466.3 million.
“At Peloton, we believe we can achieve both growth and profitability over time,” said Peloton’s CFO Jill Woodworth in a conference call on Wednesday afternoon. “We’re prioritizing our subscriber growth over profitability.” Although management expects that the company will become profitable sometime in 2023, it’s still quite a way away for investors to wait.
Despite what would normally appear to be strong results, Peloton disappointed investors in a number of areas. For one, revenue growth has actually slowed down at a crucial time in the company’s business strategy. Last year, revenue had more than doubled, but now it increased by only 77%. Losses, while not as bad as expected, are still a problem for the $9.2 billion market cap company, which will be a unchangeable reality for the company for at least 3 more years, if not longer.
While Peloton might have done better if it underwent an IPO last year or the year before, the current market climate has changed significantly. Investors are now getting tired of loss-reporting high-growth tech companies, with many of this year’s top IPOs failing to impress. Undoubtedly, this change in investor sentiments has hurt Peloton as well, as its most recent results might have been more acceptable 12 or 24 months ago.
Just yesterday, Peloton did announce a piece of good news when it confirmed that it managed to settle its legal problems with Flywheel, one of its main competitors in a patent case. Peloton’s chief legal officer claimed that the victory was a major win for the company.
Shares of Peleton fell by as much as 12% in after-hours trading following the announcement. However, despite the disappointing news, most analysts are still quite optimistic about the stock, although it wouldn’t be surprising if a few decided to cut back on their estimates. Out of the 22 Wall Street analysts covering Peleton, 20 of them have a bullish rating, while only three have a neutral “hold” rating.
Peloton Company Profile
Peloton Interactive Inc operates an interactive fitness platform. It operates its business in three reportable segments: Connected Fitness Products, Subscription, and Other. Connected Fitness Product revenue consists of sales of bike and tread and related accessories, associated fees for delivery and installation, and extended warranty agreements.
Subscription revenue consists of revenue generated from monthly Connected Fitness Subscription and Digital Subscription. Other revenue primarily consists of Peloton branded apparel. The company generates the majority of the revenue from the sale of Connected Fitness Products. – Warrior Trading News
