Peloton stocks plummet, the momentum for its home fitness equipment slackens
Cari Gundee rides her Peloton exercise bike home on April 6, 2020 in San Anselmo, California.
Ezra Shaw | Getty Images
Peloton shares fell 35% Friday after the home fitness equipment maker cut its annual sales forecast by as much as $ 1 billion.
At least four Wall Street investment firms have downgraded the stock after Peloton’s dismal first-quarter financial report released Thursday.
While the company – and its share price – saw incredible growth a year ago due to the stay-at-home trends sparked by the coronavirus pandemic, that momentum is slowing and more and more consumers are returning to gyms. Planet Fitness, for example, said Thursday that its membership numbers were almost back to a pre-pandemic peak. This stock hit an all-time high on the news.
“From forecasting consumer demand to accurately predicting logistics costs, our teams have never experienced a more complex operating environment in which to steer our expected results this year,” said John Foley, CEO of Peloton, on the conference call on the results of the Company.
Foley added that traffic on his website at Peloton has declined faster than the company expected in recent months. The visits from shoppers to the brick and mortar stores are also not overwhelmed, he said.
To put even more pressure on Peloton’s profits, the company cut the price of its original bike product by 20% in August. Executives said Thursday that the reduction helped speed up bike sales, but that also means fewer people are choosing the more expensive Bike +.
In light of the revised fiscal 2022 outlook, Peloton said it plans to make “significant improvements” to its cost structure, which includes “significant adjustments” to its hiring plans.
“Given the ongoing economic reopening and soaring logistics costs that pose obvious headwinds in the near future, we believe it will likely take Peloton a few quarters to get back on its feet,” said analysts at Truist Securities.
Truist downgraded its share rating from “Buy” to “Hold” on Friday and lowered its price target for Peloton shares from $ 120 to $ 68. The stock closed at $ 86.06 on Thursday, down 43% for the year.
In the meantime, Credit Suisse lowered its price target from $ 148 to $ 112.
“Demand is falling on all fronts, so we wonder when we can get a return on all capital employed,” said company’s analysts in a statement to customers. “In the long term, the associated fitness facility could still be intact, but the path to it seems to be more difficult.”
Peloton now expects to have between 3.35 million and 3.45 million connected fitness subscribers by the end of June, up from a previous target of 3.63 million.
JPMorgan analysts removed Peloton from the company’s focus list, but maintained an overweight position in stocks ahead of the holiday season. The group of analysts, led by Doug Anmuth, still believes Peloton’s treadmill business could reach a consumer market two to three times the size of the bicycle business.
“We believe Tread is starting slower than expected, but it remains early and sales have increased since Peloton began marketing the product 30 days ago,” said JPMorgan.
The company cut its price target from $ 138 to $ 90.
Peloton’s stock is down 63% since the start of the year.
– CNBC’s Michael Bloom contributed to this coverage.