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Peloton Stock Battered on Light Guidance, Results Seen as ‘Difficult’ -Breaking

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© Reuters Peloton (PTON) Stock Battered on Light Guidance, Results Seen as ‘Difficult’

Shares of Peloton (NASDAQ:) are down more than 23% in premarket trading Tuesday after the company issued weaker-than-anticipated Q4 revenue guidance.

PTON FQ3 revenues of $964.3 Million, down 24% YoY but below consensus estimates of $971.6 millions. For the third quarter, PTON FQ3 revenue was $964.3 million. This is 24% lower than consensus estimates of $971.6 million. The loss per share for this quarter was $2.27. The adjusted EBITDA loss was $194 million in comparison to $63.2 million profit for the same quarter last year. Analysts were expecting a loss of $132.1 millions.

The connected fitness revenue was $594.4million, down 42% YoY. It also missed the $607.8 million estimate. Revenue from subscriptions was at $369.9million, which is 55% more than the analysts’ consensus estimate of $361.5 million. Peloton reported that 2.96 Million connected Fitness subscribers signed up in Quarter 2, an increase of 42% YoY, and just slightly more than the expected figure of 2.9 Million.

According to PTON, revenue is expected to be between $675 million and $700 million in fourth quarter. This figure is considerably lower than the $820.9 million analyst estimate. PTON expects a Q4 adjusted EBITDA loss between $115 million and $120 million. Analysts were expecting a loss in the range of $19.9 to $19 million. In Q4, the company anticipates reporting 2.98million connected fitness subscribers, almost equal to the estimate of 3 million.

Peloton said lower revenue and connected fitness gross margins, along with higher operating expenses, weighed on the company’s operations and were the primary drivers behind its YoY declines.

It expects that the company will reduce its operating costs by approximately $165million in FY 2022’s second half, and $450,000,000 in FY 2023. Peloton claimed that it aims to build a global connected fitness platform, with 100 million members.

“Balance sheet challenge has been managing inventory. We have too much for the current run rate of the business, and that inventory has consumed an enormous amount of cash, more than we expected, which has caused us to rethink our capital structure,” said CEO Barry McCarthy in a shareholder letter.

To borrow $750m in five-year term debt, the company entered into a binding agreement letter with Wall Street banks JPMorgan (NYSE 🙂 and Goldman Sachs(NYSE :).

Needham & Company analyst Bernie McTernan saw FQ3 results as “difficult.”

“PTON had a difficult earnings report, as it showed a wider than expected adj. EBITDA losses in FY3Q22 were offset by lower revenue and adj. EBITDA guidance to FY4Q22E. As we look to FY’23E, our focus during the call will be new CEO Barry McCarthy’s priorities and the levers needed to reach FCF positive in ’23E and beyond,” McTernan told clients shortly after the earnings report was released.

By Senad Karaahmetovic

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