Peloton stock tanks as fitness subscriptions disappoint

Peloton Interactive

While the vaccine stock crash dominated most headlines on Friday, there were a few other stocks making big waves before the weekend. One of the more notable companies making waves was the fitness equipment maker Peloton (NASDAQ: PTON), whose shares crashed after the company reported a much worse-than-expected third quarter.

The company reported that sales of its stationary bikes, which compose of at least 60% of Peloton’s total business, fell by 17%. Overall revenue climbed up 6% to $805 million, although that’s still well below most analyst expectations. With demand for its products seeming to slow down, management ended up slashing its year-end guidance to $4.4 billion in sales, one billion dollars less than expected.

When asked about this poor performance, CFO Jill Woodworth said the company severely underestimated the impact that post-pandemic reopening would have on its top line. More people are opting to go back to the gym once again, especially now that Covid-19 cases seem to be stabilizing. In contrast, management originally anticipated that the uptick in sales it saw during the pandemic would partially turn into more long-term business.

Peloton also has been trying a new subscription service, which would give the company some a needed, long-term, consistent revenue source. However, Q3 results showed that subscription numbers actually fell compared to last quarter.

When asked about this, management said that Apple’s new privacy rules were the blame, which prevents app from tracking and selling information to third parties like Peloton. That makes it much harder for Peloton to market its subscription product to people who’d be a good fit for it.

It also didn’t help that Apple announced its new Apple Fitness+ features back during its September event. For years, Apple has been steadily creeping into the fitness market, directly competing with Peloton’s own services.

Wall Street analysts were largely disappointed with the news, although they weren’t all entirely bearish. Stifel analysts wrote in a note on Friday that it might take Peloton “several quarters to determine a more normalized pace of growth, or more skeptically, whether or not the revised outlook is an indication that the core product may be closer to maturity in existing markets than previously thought.”

Shares of Peloton were down around 35.5% over the course of the day following the news. Since the year began, Peloton has crashed a startling 61.9%, making it one of the worst-performing, large-cap companies on the Nasdaq. When the pandemic broke out last year, Peloton ended up skyrocketing from $20 per share to over $150. Now that businesses are operating more or less as usual, shares have crashed back down.


Peloton Company Profile

Peloton Interactive Inc operates an interactive fitness platform. It operates its business in two reportable segments: Connected Fitness Products and Subscription. 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. The company generates the majority of the revenue from the sale of Connected Fitness Products. – Warrior Trading News