Peloton stock rallies as Q4 earnings beat estimates

Peloton Interactive Inc (NASDAQ: PTON) jumped 10% in premarket on Thursday after coming in ahead of Street estimates for its fiscal fourth quarter, indicating that the embattled connected fitness company may finally be starting to get hold of its long-standing struggles under the interim CEO.

The exercise equipment maker reported 8 cents of per-share loss on $643.6 million in revenue for Q4. Analysts, in comparison, were at 17 cents a share and $628.47 million, respectively.

The topline, however, remained roughly unchanged on a year-over-year basis. Financial distress has weighed significantly on Peloton stock this year. At writing, it’s down nearly 45% versus the year-to-date high in early January.

Peloton stock pops despite muted guidance

Not all was sunshine and roses in Peloton’s earnings release, though.

The management failed to meet Street’s expectations for the current quarter on Thursday. It guided for up to $580 million in revenue for Q1 versus experts at $602 million. PTON’s full-year outlook also came in shy of consensus estimates today.

Peloton lost a total of $30.5 million in its fourth quarter as the number of paid subscribers inched down from 6.5 million to 6.4 million.

Heading into the earnings print, Wall Street had a consensus “hold” rating on Peloton share price. The average price target of analysts that currently sits at about $4.0, however, still represents a close to 10% upside from here.

Peloton is committed to right sizing its costs

On the plus side, Peloton Interactive improved its adjusted EBITDA significantly to $70.3 million in its recently concluded quarter and said it’s “making significant progress toward right sizing our cost structure and we’ll continue to optimise expenses”.  

The Nasdaq-listed firm saved $15 million in Q4 on the back of a restructuring plan it announced in May. That helped it achieve positive $26 million of free cash flow in the fourth quarter – up sharply from a year ago.

Investors may be rewarding Peloton stock also because it has lowered debt by some $200 million and “our average maturity has been extended to 2029”.

Additionally, the Bike+ rental programme that Peloton Interactive launched in the United Kingdom this year is exceeding expectations, the company said in its letter to shareholders on Thursday. Note that PTON is in its early innings of cash flow story and, therefore, does not pay a dividend at writing.