Peloton Interactive Inc (PTON.O) on Thursday forecast first-quarter revenue below estimates after a large quarterly loss, frustrating investors looking for progress in the company’s efforts to revive sagging sales of its fitness equipment.
Shares tumbled more than 19% to $10.88 in morning trade, set to add to the more than 60% drop so far this year.
Peloton’s exercise bikes, which are priced at above $1,400, treadmills and connected classes were all the rage among fitness enthusiasts during COVID-19 lockdowns. The company hit a peak market valuation of nearly $50 billion in early 2021, while revenue more than doubled.
But demand soon nosedived as gyms reopened following vaccinations, forcing the company to rejig its top management.
Chief Executive Barry McCarthy, a former Spotify Technology (SPOT.N) and Netflix (NFLX.O) executive, has rolled out measures to cut costs through layoffs, store closures and outsourcing manufacturing, as well as reduce inventories since taking over in February.
In his latest effort, Peloton on Wednesday said it would start selling its fitness equipment on e-commerce giant Amazon.com Inc (AMZN.O) in the United States, fueling a 20% jump in shares.
The restructuring resulted in $415 million in charges and bloated its operating expense in the fourth quarter, leading to a net loss of $1.24 billion.
“The naysayers will look at our fourth-quarter financial performance and see a melting pot of declining revenue, negative gross margin, and deeper operating losses,” McCarthy said in a letter to shareholders. “But what I see is significant progress driving our comeback and Peloton’s long-term resilience.”
The company, which in May warned of a cash-crunch, expects first-quarter sales to be in the range of $625 million to $650 million, below estimates of $783.28 million, according to Refinitiv IBES data.
“Given its level of cash, inventory, and cash burn, we view existential threats on Peloton as rising,” said MKM Partners analyst Rohit Kulkarni.