Peloton

Peloton stock sinks on $1.2 billion quarterly loss [Video]

Colin M Jenkins | Aug 26 2022 - 1:43 pm PT

Peloton’s fiscal Q4 earnings are out, and it was an ugly quarter. While there’s the silver lining of the company now officially selling on Amazon to help with inventory and logistic troubles, Peloton posted a $1.2 billion loss and saw important metrics like “Members” and “total workouts” decline for the first time ever, making Peloton stock sink.

I’m happy Peloton announced some good news with the Amazon partnership, because its quarterly earnings performance was horrible. You know an earnings report is going to be bad when the shareholder letter starts with “The naysayers will look at our Q4 financial performance and see a melting pot of declining revenue, negative gross margin, and deeper operating losses. They will say these threaten the viability of the business.”

And you know it’s going to be really bad when the 70-year-old CEO starts talking about his high school days when he used to work on a boat. And somehow, through all of that, has the ability to twist reality to tell Peloton investors losing $1.2 billion is a sign of “substantial progress.”

In response to the news, Peloton stock dropped over 20% from ~$13 to ~$10 per share.

Peloton stock sinks again

Quarterly metrics

When it came to total Members, that number for the first time in Peloton’s history went down this quarter dropping from 7 million to 6.9 million. It’s important to note this is not memberships, as a membership can have up to 20 members, and this also includes the lower cost digital membership.

As for the $44/month connected fitness subscriptions, that did go up, but not much from 2.962 million to 2.966 million. That’s an increase of just 4,000 members over three months.

And total workouts also went down for the first time, and quite dramatically from 164.6 million workouts to 131.7 million workouts for Q4. That’s a 20% drop in usage.

When it came to sales, Peloton moved $295 million in equipment, which is a 50% drop from the previous quarter, and that’s before Peloton increased its prices.

Some good news – subscription gross profit did increase a bit from $252 million to $260 million. But remember, Peloton increased the cost of membership by over 10% (from $39 to $44 monthly) mid way through Q4 with gross profit only increasing 3%, not great.

Overall, the $1.2 billion quarterly loss was a huge 64% increase QoQ. CEO Barry McCarthy chalked up a lot of that to one time expenses to help Peloton get in a better position.

Time for an acquisition?

Barry says this all actually shows substantial progress. I know they are doing a lot to move things around, sell bikes through Amazon, etc., but this looks bad. This looks really bad.

I’m a big believer that Peloton is here to stay, I think the content is just too good and the love for the company too high for it to fully go down. But it seems like every time Barry talks, that this company will need to be sold ASAP. I’m not sure if or when that will happen, but I don’t think anybody wants to hear one of Barry’s Boat Stories again.

What do you think? Share your thoughts in the comments below!