Peloton Interactive, Inc. (NASDAQ: $PTON) is a fitness equipment manufacturer and media company based in NYC. It produces stationary bikes, indoor rowers, and treadmills with touchscreens connected to the internet. The company offers subscription-based live streams of on-demand fitness classes via the screens.
On Thursday, February 1, 2024, Peloton released its second-quarter results and outlook before markets opened.
Peloton Second Quarter Results
For the second quarter of fiscal 2024, Peloton reported revenue of $743.6, a 6% decline from the $792.7 million reported a year ago. However, it was a 25% increase from the $595.5 million reported in the first quarter of fiscal 2024. The net revenue for Q224 was above analysts’ estimates of $733.5 million.
It had a net loss of $194.9 in the three months ending December 31, 2023, a net loss per share of $0.54, below analysts’ estimates of $0.53. Peloton recorded a total gross profit of $299.4 million, a 27% increase Y/Y. Its total operating expenses for the quarter were $486.5 million, a 14% decline Y/Y.
Subscriptions Numbers
Peloton reported that Ending Paid Connected Fitness Subscriptions rose by 40 thousand in the quarter to 3 million. The company said that Average Net Monthly Paid Connected Fitness subscription churn was down 1.2%.
According to Peloton, the drop in churn was due to fewer-than-expected new subscription pause requests and faster reactivation rates. Gross additions were positively impacted by shorter hardware delivery times.
Paid app subscriptions dropped by 44 thousand in the quarter to 718 thousand. The paid app subscriptions were higher than anticipated due to higher-than-anticipated additions and a lower average monthly churn of 7.2%.
Disappointing Third Quarter Outlook
Peloton’s third-quarter forecast came in below expectations. The company forecasts sales of $700-$725 million, against analysts’ forecast of $754 million, based on LSEG numbers. Its adjusted EBITDA loss guidance is $20-$30 million, compared to analysts’ forecast of $2 million.
Peloton forecasts Ending Paid Connected Fitness Subscriptions for the full year will remain unchanged at 2.99-3.01 million subscriptions. It forecasts that Ending Paid App Subscriptions could decline by around 9%, based on a guidance of 700-800 thousand subscribers, compared to 830 thousand at the end of fiscal 2023.
Peloton is anticipating an adjusted EBITDA loss of $75-$25 million for the full year, which would be a 76% improvement from last year’s figure of $208.5 million.
The company dialed back its FY24 revenue forecast to $2.68 -$2.75 billion from a previous forecast of $2.8 billion. Its new forecast is a 3% decline from fiscal 2023 revenue of $2.8 billion.
CEO Aims For A Return To Growth
During the pandemic, Peloton recorded exceptional sales growth. Its stock grew more than five times amidst lockdowns in 2020. However, its expensive bikes and other equipment sales slowed in 2021 as pandemic lockdowns were eased.
The founder and CEO, John Foley, stepped down, and CEO Barry McCarthy stepped in to right the ship. Since McCarthy took over, Peloton has shown signs of recovery. However, it continues to miss important targets.
In early 2023, McCarthy set a goal of returning Peloton to revenue growth in a year. However, that has yet to happen. Peloton expects to return to revenue growth by June, the end of fiscal 2024, after embarking on several growth initiatives.
McCarthy also aimed to return the company to a positive EBITDA, which has yet to happen. He now expects to achieve positive cash flow during Q424.
On a positive note, the CEO said that retail partnerships established with Amazon, Dick’s Sporting Goods, and others were doing well. He noted that Y/Y unit sales had increased 74% in Q2 due to these partnerships.
McCarthy also noted that the bike rental program was showing positive results, with Peloton forecasting a 100% Y/Y growth in revenue for the segment in fiscal 2024.
Peloton (NASDAQ: $PTON) Stock Performance
After releasing its Q2 results, Peloton stock took a significant hit, losing 24.28% of its value at the close of trading on February 1, 2024. A year ago, PTON stock was worth $16 per share. In early 2021, the stock peaked at $170 per share.
PTON stock went to an all-time low of $4.17 during the trading session. Since the beginning of 2024, PTON stock has lost 27.66% of its value. The stock has lost 75.21% of its value in the past 12 months. PTON stock closed trading at $4.21 per share.
PTON Stock Forecast
Stock analysts give PTON stock an overall hold rating. They forecast a broad target for the stock with a high of $20 and a low of $3. Their median target for PTON is $6, a 42.52% upside based on the last closing price of $4.21.
Despite the huge drop in investor confidence after the latest results, some analysts remain bullish on the stock. For instance, Citi analysts have a buy rating. They point to the rise in subscriber numbers as a positive. Additionally, they note that the free cash flow loss has greatly narrowed.
JP Morgan has an Overweight rating for the stock. They point to the subscription numbers, which exceeded expectations. Additionally, they point out that Peloton has embarked on several growth initiatives. These include partnerships with retailers and TikTok. The bank also pointed to management’s forecast of positive revenue growth in Q424.
Should You Buy PTON Stock?
Despite the few optimistic forecasts for Peloton, the overall market sentiment is negative. The last few years have been a roller-coaster for the company. It proves how difficult it is to enjoy lasting success in the fitness world. The fitness sector is extremely competitive in regards to equipment and content creation. Additionally, players in the industry have to compete with physical gyms.
Based on all these factors, finding a footing back to its pandemic highs will be difficult. The company is still struggling to stem successive quarterly revenue declines. Additionally, it is in rebranding mode, aiming to turn itself from a luxury brand into a brand for the masses. Consequently, waiting on the sidelines until Peloton can find a path back to growth and profitability would be wise.
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