Peloton earnings could disappoint investors, analysts say

Peloton earnings could disappoint investors, analysts say

A Peloton Interactive Inc. emblem on a stationary bike on the firm’s showroom in Dedham, Massachusetts, U.S., on Wednesday, Feb. 3, 2021.

Adam Glanzman | Bloomberg | Getty Photos

Peloton’s troubles have lingered into the brand new 12 months.

JPMorgan analyst Doug Anmuth stated Wednesday that declining visits to Peloton’s web site and higher-than-normal promotional exercise prompted him to forecast larger losses forward for the linked health firm.

Anmuth slashed estimates for income and subscriber development within the fiscal second quarter, which led to December. He expects Peloton’s second-quarter gross sales will inch as much as $1.1 billion from $1.06 billion final 12 months. Beforehand, he noticed gross sales touching $1.2 billion.

Weighing on gross sales development are slowing subscriber acquisitions. He expects Peloton to report 2.79 million linked health subscribers, with 300,000 internet new provides within the second quarter. Beforehand, he forecast 2.83 million subscribers.

Each of those estimates are beneath Peloton’s inner expectations. The corporate has guided for between $1.1 billion and $1.2 billion in gross sales, and between 2.8 million and a couple of.85 million subscribers.

For the complete 12 months, Anmuth sees gross sales amounting to $4.2 billion, down from a previous forecast of $4.6 billion. He expects Peloton’s subscriber base to develop 42% 12 months over 12 months, down from an earlier estimate of 47%. That is a marked deceleration from prior years. In 2021, Peloton grew subscribers by 114%. In 2020, that base elevated 113%.

In early November, Peloton lowered its 2022 income expectations to between $4.4 billion and $4.8 billion, down from $5.4 billion. It lower expectations for subscribers to a spread of 3.35 million to three.45 million, down from 3.63 million. 

Peloton seemingly faces comfortable shopper demand within the close to time period and uncertainty within the again half of the 12 months, Anmuth stated. Citing Similarweb information, he stated visits to on desktop computer systems and cell units dropped 5% in its second quarter, which led to December, in contrast with the prior 12 months.

Peloton declined to remark. It’s anticipated to report earnings in early February.

Analysts shedding confidence within the quick time period

Progress is not coming as simple for Peloton because it did on the onset of the pandemic, when the corporate’s inventory was additionally the last word stay-at-home play. Traders see it being challenged by competitors from different at-home health choices and fitness center chains resembling Planet Fitness and New York City-based Equinox. This has forced Peloton to spend more to acquire new customers.

Peloton needs to create new workout devices in order to lure in people who don’t have an interest in its bikes or treadmills. Or, it must entice existing subscribers to build out their home gyms. It’s also eyeing international expansion as another lever for growth. That will come at a cost, at least in the short term.

Anmuth cut his December 2022 price target for Peloton shares to $50 from $70. That’s still about 48% upside from Tuesday’s closing price of $33.82. Earlier Tuesday, Peloton’s stock hit a 52-week low of $32.39, amid several days of continued losses in market value. But, on Wednesday, shares were down slightly.

Analysts who cover the company expect the stock to bounce back. The stock’s average price target is $72.42, according to FactSet. BMO Capital Markets analyst Simeon Siegel has the lowest target of the group, at $45. But that’s still above where shares are trading currently.

At this point, Peloton has nearly wiped out its pandemic-fueled stock gains. In 2021, shares tumbled 76%, after rising more than 440% in 2020.

Early last week, Raymond James analyst Aaron Kessler also said he expected a disappointing December, which could prompt the company to cut its full-year forecast again.

“When Peloton provided guidance, we believe the company was assuming a return to stronger seasonality in the December quarter following the slower summer seasonality,” said Kessler in a note to clients.

Net subscriber adds in the second quarter could come in closer to 220,000, he said. Raymond James has a “bear case” rating on the stock of $27 and a “bull case” rating of $51. Kessler said a fair value would be about $38 per share.

Two days later, Baird analyst Jonathan Komp cut his price target for Peloton shares to $70 from $90. The firm also removed Peloton from its “fresh pick” list.

“Several indicators have reduced our confidence in near-term estimates,” said Komp in a research note. However, he said that he’s more optimistic about Peloton’s longer-term prospects in the booming health and fitness industry.

Similar to JPMorgan’s Anmuth, Komp said net subscriber adds in the second quarter could be around 300,000 and miss the company’s provided expectations.

He also said Peloton’s instructors have not been gaining as many followers on social media platforms of late. This is something that has been indicative of the company’s performance in the past, he said.

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