If you thought things couldn’t get any worse for the Peloton share price, with the shares already at record lows and down over 90% from their pandemic peaks, then you’d have been wrong, after today’s latest disappointing trading update.
After a dismal Q2, the company cut its estimate for full-year revenue to $3.7bn to $3.8bn, a big reduction from the $5.4bn which it was at the end of its last fiscal year. The company also adjusted its Q3 revenue estimates lower to a number just below $1bn, at $971.6m, with an EBITDA loss of between $125m to $140m.
Even with such a low bar, the company still managed to miss out, reporting $964.3m, and EBITDA losses of $194m, while for Q4 the company said it expects to see $675m to $700m, well below previous estimates of $821m. Peloton also said it expects EBITDA losses in Q4 of $115m to $120m.
On the plus side paid digital subscribers rose to 976,000, beating expectations, but this only accounts for just over one third of the quarterly revenue at $369.9m. Losses came in at $757.1m, with a good chunk of this due to restructuring costs as management look to cut 2,800 jobs to make savings in the new post-pandemic world.
Peloton’s biggest problem is its inventory, it simply has too many products it can’t shift, with little sign of a demand pickup any time soon. Its bikes and treadmills are still very expensive, even with the recent price cuts, and with inflation still rising consumers are going to be even more price sensitive than they are now. This high level of inventory is a problem for a company with not much in the way of cash, and could see it become the target of renewed takeover interest in the coming weeks, even with the long-term funding deal of $750m it has just agreed with JPMorgan and Goldman Sachs.
There was some interest a few months ago, with names like Apple, Nike and Amazon getting bandied about, and with the shares even lower now than they were then there could well be renewed interest at a much lower price. In short, it’s been a horrible 18 months for Peloton, going from the yellow jersey pandemic leader to the lantern rouge, or red lantern position, sliding ignominiously to the rear of the pack, as we look to trade at new record lows.
Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.