Peloton shares tumble after massive quarterly loss

Peloton Interactive Thursday forecast first-quarter revenue below estimates after a large quarterly loss, frustrating investors looking for progress in the company’s efforts to revive sagging sales of its fitness equipment.

Shares tumbled 18% to $11.01, adding to the more than 60% drop so far this year.

Peloton’s exercise bikes, which are priced at above $1,400, treadmills and connected classes were all the rage among fitness enthusiasts during COVID-19 lockdowns. The company hit a peak market valuation of nearly $50 billion in early 2021, while revenue more than doubled. The stock hit an all-time high of $167.42 on Jan. 13, 2021.

But demand soon nosedived as gyms reopened following vaccinations, forcing the company to rejig its top management.

Chief Executive Barry McCarthy, who has worked at Spotify Technology and Netflix, has focused on cost cuts through layoffs and store closures, outsourcing manufacturing and slimmer inventories since taking over in February.

In his latest effort, Peloton on Wednesday said it would start selling its exercise bike and other fitness accessories on e-commerce giant Amazon in the United States, fueling a 20% jump in shares. 

The restructuring resulted in $415 million in charges and bloated its operating expense in the fourth quarter, leading to a net loss of $1.24 billion.

“The naysayers will look at our fourth-quarter financial performance and see a melting pot of declining revenue, negative gross margin, and deeper operating losses,” McCarthy said in a letter to shareholders. “But what I see is significant progress driving our comeback and Peloton’s long-term resilience.”

The company, which in May warned of a cash-crunch, expects first-quarter sales to be in the range of $625 million to $650 million, below estimates of $783.28 million, according to Refinitiv IBES data.

“Given its level of cash, inventory, and cash burn, we view existential threats on Peloton as rising,” said MKM Partners analyst Rohit Kulkarni.

Net loss attributable to Class A and Class B common stockholders widened to $1.24 billion, or $3.68 per share, in the fourth quarter, from $313.2 million, or $1.05 per share, a year earlier.

Sales fell about 28% to $678.7 million.