Peloton Plummets After Miss-And-Lower Q2: Investors Feel The Burn

Peloton Interactive, Inc. (NASDAQ:PTON) shares were in the gutter Thursday, dropping 25% following a disappointing second-quarter earnings report and the announcement of a key leadership departure.

• PTON stock is tanking. See the chart and price action here. 

Here is the breakdown of why investors are selling off Peloton stock:

Double Miss

Peloton missed analyst estimates on both the top and bottom lines for the crucial holiday quarter:

• Revenue: Reported $656.5 million, a 3% year-over-year decline and well below the $677.2 million analysts expected, according to Benzinga Pro. 
• Loss per Share: Reported a loss of 9 cents per share, wider than the 6 cent loss anticipated by Wall Street.
• Subscriber Decline: Paid connected-fitness subscriptions fell 7% to 2.66 million, the lowest level in over four years (since September 2021).

"So yes, revenue missed our expectations for the quarter … I think that’s a reflection on our old equipment … we simply overestimated the rate with which existing members would want to upgrade their existing equipment to new equipment," CEO Peter Stern said on the earnings call, in an attempt to put a positive spin on the revenue miss.  

Lowered Outlook 

Wall Street hates a miss-and-lower quarter and that’s exactly what Peloton delivered. 

The company cut its full-year revenue guidance to $2.4 billion to $2.44 billion, and its Q3 guidance of $605 million to $625 million also came in below the $637 million analyst estimate. 

Peloton also sees a significant decrease in subscriptions ahead in the third quarter.  

"Our guidance is 2.65 to 2.675 million paid connected fitness subscriptions. That reflects an increase of 2,000 subs quarter-over-quarter and a decrease of 218,000 year-over-year," Coddington stated. 

CFO Departure

Adding to the uncertainty, Peloton announced that CFO Liz Coddington will step down in March to pursue another opportunity. 

While the company stated her departure was not due to any disagreements over finances, investors often view the exit of a CFO during a difficult turnaround period as a red flag.

"When I leave in a couple of months, I will do so with mixed emotions, knowing that Peloton Interactive, Inc.’s best days lie ahead," Coddington said on the earnings call. 

Broader Sentiment

Despite new products like the Cross Training Series and AI-driven features like Peloton IQ, the company is still struggling to find a path back to sustainable growth. 

Peloton stock is trading near all-time lows, down more than 97% from its Covid-era 2021 peak. 

If only Peloton could include another stay-at-home pandemic in its outlook… 

PTON Price Action: Peloton shares were down 25% at $4.43 at the time of publication Thursday, according to Benzinga Pro. 

Photo courtesy of Peloton Interactive, Inc.