Peloton investors have certainly been taken for a ride over the last two years but may finally be seeing a return on their pain.
Let’s see what has everyone, including the stock, so pumped. 👀
Before the opening bell, the company reported a loss per share of $0.98 per share. While that is wider than the expected $0.64 per share loss and its eighth straight quarter without a profit, it was a narrower decline than the prior year.
While that news is marginally positive, its revenue and subscriber numbers were the show’s real stars. Its revenues of $792.7 million blew away the $710 million consensus estimate and the company’s $700 to $725 million expected range. Although revenue is still down 30% YoY, the company ended the quarter with 6.7 million total members and 3.03 million connected fitness subscriptions. That represents a 10% YoY jump. 👍
One concern for analysts remains that the company continues to lose money on hardware, with gross equipment margins of -11.2%. However, subscription gross margins of 67.6% helped drive total gross margin up significantly YoY to 29.7%. Executives see the hardware loss as a cost of customer acquisition since they know profits on its subscriptions will offset the upfront losses…as long as they keep that customer.
Its CEO Barry McCarthy referred to this quarter’s results as a “potential turning point” for the business, which has been on the turnaround path for over a year. When he joined, the priority was proving the viability of the business and improving free cash flow and profitability. But now that many of the company’s initiatives are producing results, the priority has shifted back towards growing the business well into the future. 📈
That positive sentiment translated to a strong first-quarter outlook. The company expects sales of $690 to $715 million and a total gross margin of about 39%. Wall Street had expected $692.1 million in sales. 💪
The remaining questions for investors are how fast can it grow? Where is that growth coming from? And what level of portability can the company achieve? Executives say they hope to begin answering those questions in the coming quarters.
$PTON shares pumped 26% on the news. It joins the likes of other tech companies, like Spotify and Meta, which have surprised to the upside this week. 🤩
