Peloton stock opens 30% down after Q4 earnings

Peloton Interactive Inc (NASDAQ: PTON) opened nearly 30% down on Wednesday after reporting its financial results for the fourth quarter that brought in a string of bad news for the shareholders.

Peloton reports higher costs and churn

The connected fitness company bore “substantially” higher costs related to the recall of its bikes in May. As many as 20,000 of its members paused their subscriptions as well in the recently concluded quarter as they waited for Peloton to replace the seat posts on their bikes.

Peloton Interactive did end the quarter with $1.0 million in free cash flow (pro-forma) but CEO Barry McCarthy wasn’t particularly hawkish in the letter to shareholders.

Note that the aforementioned free cash flow figure excludes a $75 million legal settlement with Dish Network in May. Peloton stock is now down nearly 70% versus its year-to-date high.

Notable figures in Peloton’s Q4 earnings      

• Lost $242 million versus the year-ago $1.26 billion
• Per-share loss also narrowed from $2.72 to 68 cents
• Adjusted EBITDA loss printed at $35 million in Q4
• Revenue slipped 5.5% year-on-year to $642 million
• Consensus was 40 cents loss and $641 million revenue

Peloton attributed the weakness in hardware sales partially to a seasonal slowdown but said the trend has now reversed.

Peloton stock down on weak guidance

Peloton stock is taking a hit this morning also because the management issued disappointing guidance for its current financial quarter.

The exercise equipment company now sees its revenue coming in between $500 million and $600 million in Q1. In comparison, analysts were at a much higher $647 million. According to CEO McCarthy:

He expects Peloton Interactive to return to positive free cash flow in the back half of FY24. Heading into the earnings print, Wall Street had a consensus “hold” rating on PTON.