Peloton stock falls by 7 percent following FQ1 2020 earnings report

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Peloton sees massive revenue increase, stock falls on investor sentiment.
Image: Peloton

On Tuesday, Peloton posted its first earnings report since going public in September, and the firm showed improvement in several key areas. However, Wall Street did not respond warmly to the corporation’s diminished losses and rapid subscriber growth. Indeed, the firm’s stock price dipped by 7 percent. The company’s investors are unhappy that it is more focused on growth than profitability.

Peloton’s FQ1 2020 Earnings

Peloton’s first earnings release since its IPO showed that the smart exercise equipment maker generated $228 million in revenue, up 50 percent year-on-year. Yet, Peloton recorded losses of $49.8 million in the fiscal first quarter of 2020. On the bright side, the firm reduced its losses by 9.4 percent from the same frame last year.

Besides, Peloton also exceeded market analyst expectations. Bloomberg reports that Wall Street forecasted losses of $114 million for the New York City-based fitness tech company.

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The firm also added 52,000 connected subscribers to its user base, which now exceeds 563,000. In FQ1 2019, the corporation only boasted 277,000 members. However, Peloton experienced slower growth compared to previous periods.

In an investor presentation, Peloton explained that the previous quarter represents its slow season. As such, the firm expects business to pick up in FQ2 2020 due to holiday sales, lower temperatures driving fitness junkies indoors, and a New Year’s resolution bump. Also, the corporation will be making its offerings available in Germany for the first time on November 20.

Mixed Outlook

Peloton offered a mixed near-term outlook with a slightly better forecast for the long-term.

The firm expects to bring in between $1.45 billion and $1.5 billion in the fiscal year ending June 2020. As such, the company’s projections are higher than analyst predictions, which peg the firm’s annual revenue at $1.39 billion. Peloton also expects to have between 885,000 to 895,000 connected subscribers by next summer.

That said, the tech company doesn’t yet have profitability on its immediate roadmap. CEO John Foley said that his company is focused on breaking into international markets, developing new products, and producing more digital content. Currently, the fitness brand is building large new production facilities in both New York City and London.

“I believe if we pulled back on growth we could be profitable tomorrow,” noted the executive. “But that is not what the board and the leadership of Peloton believes we should do.” While Foley said that his firm is now in “investment mode,” he offered guidance that it will turn a profit in fiscal year 2023.

Presently, it’s unclear if Peloton’s shareholders will have the patience to allow Foley to realize that vision. In September, the firm priced its initial public offering at $29 per share. As of this writing, Peloton’s stock price is $23 per share, a decline of 20.68 percent.