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Peloton shares fall regardless of the decline in earnings because the bike maker warns of ongoing provide shortages

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Peloton saw quarterly sales growth of 232% on Thursday, exceeding the company's expectations as consumers turned to their bikes and treadmills to exercise from home during the coronavirus pandemic.

The bicycle maker has raised its sales outlook for fiscal 2021 and now expects total sales of $ 3.9 billion or more, from $ 3.5 billion previously to $ 3.65 billion. According to a refinitive poll, analysts had asked for $ 3.63 billion.

However, with the increased demand for its products, Peloton is struggling to keep up. It said Thursday it expected to operate under supply constraints "for the foreseeable future".

Peloton stocks fluctuated in after-hours trading and recently fell around 5% after rising more than 343% this year. The stock closed nearly 7% on Thursday.

The company reported for the first quarter of fiscal 2021 versus analyst expectations, based on an analyst survey by Refinitiv:

  • Earnings per share: 20 cents compared to 11 cents expected
  • Revenue: $ 757.9 million versus $ 748.1 million expected

Peloton anticipates profits will come under pressure as it is opening new manufacturing facilities quickly and due to the additional shipping costs incurred during the busy holiday season.

"As we rapidly scale our organization to meet the exceptional demand for our products, we are finding that some of our members have experienced lengthy delays in receiving our products or fulfilling support requests," said John Foley, chief Executive Officer, in a letter to the shareholders.

In the three months ended September 30, earnings rose from a loss of $ 49.8 million, or $ 1.29 per share last year, to $ 69.3 million, or 20 cents per share, according to Peloton. Analysts had expected Peloton to make 11 cents a share.

Revenue increased 232% from $ 228 million a year ago to $ 757.9 million, exceeding expectations of $ 748.1 million.

Peloton announced that the quarter ended with more than 1.33 million connected fitness subscribers, up 137% year over year. Affiliate Fitness Subscribers are those who pay $ 39 per month to sync their Peloton exercise classes with their Peloton devices instead of accessing the programs separately on a phone or tablet and paying just $ 12.99.

Even during the pandemic, Peloton proves that once a new customer attracts a new customer, it tends to stick with them. It has gained a wave of new users who no longer pay to go to the gym. Average monthly net fitness churn was 0.65% last time, compared to 0.75% in the previous quarter.

The company now predicts the churn rate will stay below 0.9% in fiscal 2021, compared to an earlier forecast of below 1%. Churn for the current quarter is likely to remain below 0.85%.

Peloton also expects 1.63 million connected fitness subscribers by the end of the fiscal second quarter and 2.17 million by the end of the fiscal year. Revenue of $ 1 billion is required for the second quarter. Analysts forecast $ 939 million.

The September 9 launch of the Peloton Bike +, which includes more features than its original spinning bike and costs $ 2,495, "resulted in call volume and unacceptably long wait times far beyond our expectations," said CEO Foley.

Peloton hopes to meet normalized delivery times for its bikes by the end of the calendar year, but waiting times for its newest Bike + "will likely be extended for the next few quarters."

Peloton users continue to train as well. This is partly due to the fact that some households share their membership among multiple people. The company said its affiliate fitness subscribers complete an average of 20.7 monthly workouts, up from 11.7 last year.

The company also said it continues to ramp up its content production, creating more than 2,400 new classes during the quarter to ensure its members don't get bored. New Bike Bootcamp and Barre classes were introduced during the quarter.

Peloton has a market cap of $ 36.9 billion.

The full press release can be found here.

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Steven Gregory