Insights

Why Peloton Stock Dropped Today

What happened
Shares of Peloton Interactive (NASDAQ: PTON) sank on Tuesday after the exercise equipment maker warned investors that its growth was slowing. As of 2:37 p.m. ET, Peloton’s stock price was down more than 8% after falling as much as 20.4% earlier in the day.
So what 
Peloton’s subscription revenue jumped 55% year over year to $369.9 million in its fiscal third quarter, which ended on March 31. The company ended the quarter with 2.96 million connected fitness subscribers. These are people who have purchased a Peloton bike or treadmill and pay a monthly fee to attend its virtual exercise classes.
However, Peloton’s connected fitness products revenue declined by 42% to $594.4 million. With COVID-19 case counts moderating, more people are returning to gyms and fewer people are now buying the company’s in-home exercise equipment.
In all, Peloton’s total revenue decreased by 24%, to $964.3 million.
Gym reopenings have dented demand for Peloton’s bikes and treadmills. Image source: Getty Images.

At the same time, the company’s operating expenses more than doubled to $920 million. Restructuring and impairment charges contributed to the increase, as Peloton attempted to rightsize its business to better align with the decline in demand for its products.
All told, Peloton generated a net loss of $757.1 million, compared to a loss of $8.6 million in the prior-year quarter.
Now what
With its equipment sales softening, Peloton expects its subscriber growth to decelerate markedly. Management projects that its connected fitness subscriptions will inch up to 2.98 million by the end of the fourth quarter, which would represent sequential growth of less than 1%. The company also warned that its total revenue will decline by roughly 27% compared to the fourth quarter of fiscal 2021.
Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Peloton Interactive. The Motley Fool has a disclosure policy. –

What happened

Shares of Peloton Interactive (NASDAQ: PTON) sank on Tuesday after the exercise equipment maker warned investors that its growth was slowing. As of 2:37 p.m. ET, Peloton’s stock price was down more than 8% after falling as much as 20.4% earlier in the day.

So what 

Peloton’s subscription revenue jumped 55% year over year to $369.9 million in its fiscal third quarter, which ended on March 31. The company ended the quarter with 2.96 million connected fitness subscribers. These are people who have purchased a Peloton bike or treadmill and pay a monthly fee to attend its virtual exercise classes.

However, Peloton’s connected fitness products revenue declined by 42% to $594.4 million. With COVID-19 case counts moderating, more people are returning to gyms and fewer people are now buying the company’s in-home exercise equipment.

In all, Peloton’s total revenue decreased by 24%, to $964.3 million.

Gym reopenings have dented demand for Peloton’s bikes and treadmills. Image source: Getty Images.

At the same time, the company’s operating expenses more than doubled to $920 million. Restructuring and impairment charges contributed to the increase, as Peloton attempted to rightsize its business to better align with the decline in demand for its products.

All told, Peloton generated a net loss of $757.1 million, compared to a loss of $8.6 million in the prior-year quarter.

Now what

With its equipment sales softening, Peloton expects its subscriber growth to decelerate markedly. Management projects that its connected fitness subscriptions will inch up to 2.98 million by the end of the fourth quarter, which would represent sequential growth of less than 1%. The company also warned that its total revenue will decline by roughly 27% compared to the fourth quarter of fiscal 2021.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Peloton Interactive. The Motley Fool has a disclosure policy.

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