6 Peloton Analysts Break Down Q1 Earnings: ‘Not the Year We Envisioned’

Peloton CEO John Foley (L) is seen behind one of his company's fitness machine along with others gathered for the groundbreaking for the company's first U.S. factory in Luckey, Ohio, on Aug. 9, 2021. (John Seewer/AP Photo)

Peloton Interactive Inc. (PTON) shares dropped 35 percent Friday after the company reported a wider-than-expected loss and aggressively cut its full-year guidance.

Peloton reported a fiscal first-quarter earnings per share (EPS) loss of $1.25 on revenue of $805.2 million. Both numbers fell short of consensus analyst estimates of a $1.07 per-share loss and $810.7 million, respectively. Revenue was up 6 percent from a year ago.

Connected fitness product sales, which made up 62 percent of Peloton’s total revenue, dropped 17 percent to $510 million. Subscription revenue was up 94 percent to $304.1 million. Peloton reported 2.49 million connected fitness subscribers, up 87 percent year-over-year.

Looking ahead, Peloton guided for first-quarter revenue of between $1.1 billion and $1.2 billion, well short of analyst estimates of $1.5 billion. Peloton also cut its full fiscal year revenue guidance from $5.4 billion to between $4.4 billion and $5.4 billion.

New Normal?

MKM Partners analyst Rohit Kulkarni said the pandemic poster child is now transitioning to a new normal.

“We were wrong about PTON’s ability to execute amidst reopening and competitive headwinds,” Kulkarni wrote.

Raymond James analyst Aaron Kessler said Peloton’s risk-reward is balanced.

“We believe the stock is likely to remain range-bound until signs of increasing demand return, which is likely to be a couple quarters at least,” Kessler wrote.

Telsey Advisory Group analyst Dana Telsey said she remains positive on the long-term outlook for the connected fitness business.

“However, near-term sales visibility is clouded by slowing traffic online, a mix shift to the lower priced Bike, and slower adoption of Tread,” Telsey wrote.

Buying the Dip?

Bank of America analyst Justin Post said the new guidance is “not the year we envisioned,” but the post-earning selloff seems overly bearish.

“While estimate cuts are a negative, we still expect 1.1mn sub adds in FY22 (+47 percent y/y) despite reopening impact, and there is potential upside from new products,” Post wrote.

KeyBanc analyst Edward Yruma said Peloton has set a low bar for fiscal 2022 ahead of potential new device launches.

“It’s hard to pound the table at exactly this moment given the volatility, but LT growth algo (low churn underpins strong sub. NPV) and our enthusiasm remain intact,” Yruma wrote.

Needham analyst Bernie McTernan said upside for Peloton will hinge on its growth trajectory in fiscal 2023 and beyond.

“Our forecast assumes a rebound in FY'23 as PTON is still in the early part of its adoption curve, we believe, and adding incremental customer funnels, although given the current outlook there is a high degree of potential variability in the outcome,” McTernan wrote.

Peloton Ratings, Price Targets

• Bank of America has a Buy rating and lowered the price objective from $138 to $112.
• MKM Partners has a Neutral rating and slashed the price target from $130 to $70.
• Raymond James has a Market Perform rating.
• KeyBanc has an Overweight rating and lowered the price target from $155 to $110.
• Needham has a Buy rating and cut the price target from $130 to $105.
• Telsey Advisory Group has a Market Perform rating and cut the price target from $135 to $70.

By Wayne Duggan

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