'No Pain, No Gain': Peloton (PTON) Plunges on Weak Earnings and Outlook, Analysts Lower Estimates But Remain Bullish

Shares of Peloton (NASDAQ: PTON) are down 10% in early Friday trading after the connected fitness company presented disappointing FQ4 results and outlook.

Peloton said it made a Q4 EPS loss of $1.05, much worse than the analyst estimate of a loss of $0.44. Revenue for the quarter came in at $937 million versus the consensus estimate of $921.66 million.

“The past year represented an inflection point for the connected fitness industry, with significant increases in awareness and demand following the onset of the COVID-19 pandemic. As we have discussed in the past, this necessitated significant investment in manufacturing capacity, logistics and expedited shipping to reduce order-to-delivery windows, which we were pleased to restore to pre-pandemic levels during the fourth quarter,” the company said in a press release.

For this quarter, Peloton projects revenue of $800 million versus the consensus of $1.06 billion, and FY revenue of $5.4 billion vs consensus of $5.3 billion.

Peloton also announced it is slashing the Bike price by $400 to $1,495.

KeyBanc analyst Edward Yruma reiterated an “Overweight” rating and a $185.00 per share price target on PTON despite a weak FQ4 print and outlook.

“PTON’s $400 price cut underscores management’s commitment to driving market share (and LT profitability). We view this as a critical inflection, with PTON aiming to drive more “internet” market share (40%+) vs. “consumer” market share (15%+) within connected fitness. This could stymie a number of emergent competitors, and in addition to the LTV of the subscription (50%+ contribution margins), we are increasingly optimistic on ongoing hardware and apparel sales. Net add guidance of 1.3M is above our previous expectations, and we think underscores confidence in the Tread launch. At 12.2x FY23 EV/gross profit, we view this as a highly attractive entry point,” Yruma said in a client note.

Stifel analyst Scott Devitt reiterated a “Buy” rating and $140.00 per share.

“While the near-term profitability outlook is pressured, we note that gross margin headwinds are largely transitory and should abate through the year as conditions normalize. Importantly, FY22 guidance calls for revenue and CF subscribers ahead of expectations despite challenging prior year compares and normalizing consumer behavior. We continue to see multiple drivers for sustainable growth with the upcoming Tread launch, ongoing international expansion and opportunities for new hardware,” Devitt said in a client note.

Shares of Peloton are down 22% YTD.

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