Peloton Implodes After Company Slashes Guidance, Cuts Price Of Bike By 20%

Peloton Implodes After Company Slashes Guidance, Cuts Price Of Bike By 20%

After three years of people pretending the emperor was not naked, and the Peloton was more than just an exercise bike with an iPad superglued to it, it’s all suddenly came crashing down after the close when Peloton reported the ugliest quarter in its history, slashing guidance, unveiling channel-stuffing accounting gimmicks, and cutting the price of its bike by 20% due to plunging demand sending its stock almost 20% lower.

“Excuse me, I need to go place some hedging trades”

First, looking at the just concluded fiscal Q4, the company’s results were not that bad if one excludes the massive EPS miss:

Revenue $936.9 million vs $607.1 million y/y, better than the estimate $929.1 million
Connected fitness revenue $655.3 million vs $485.9 million y/y, better than the estimate $630.8 million
Subscription revenue $281.6 million vs $121.2 million y/y, better than the estimate $278.4 million
Adjusted Ebitda loss $45.1 million, better than the estimate loss $57 million
Paid digital subscribers 874,000, better than the estimate 1.06 million
Connected fitness subscribers 2.33 million, estimate 2.28 million
But, Q4 Loss per share was a whopping $1.05 vs exp. of “only a 0.45 print.

That’s as good as it got, because looking ahead, the covid “WFH” wave that Peloton had surfed for the past 18 months came crashing down, with the company reported atrocious Q1 projections, missing on every item:

Sees revenue $800 million, estimate $1 billion (range $786.0 million to $1.15 billion) (Bloomberg Consensus)
Sees adjusted Ebitda loss $285 million
Sees connected fitness subscribers 2.47 million, estimate 2.50 million

While the full-year guidance was not just as terrible, we expect this number to also collapse in coming months – here is Peloton’s 2022 full-year forecast:

Sees revenue $5.4 billion, estimate $5.20 billion (range $3.55 billion to $5.71 billion)
Sees adjusted Ebitda loss $325 million, far far worse than what many analysts were saying, expecting a cash flow positive year.
Sees connected fitness subscribers 3.63 million, estimate 3.40 million

But wait there’s more: we start with the company’s accounting woes, with Peloton reporting that it identified material weakness over financial reporting with respect to identification and valuation of inventory; i.e., channel stuffing. The silver lining: this won’t result in any restatements of historical results, although we doubt this will be the case when the SEC gets wind of this.

But the worst news for bulls is that the Peloton crazy is officially over, and we are now in deflation world, with Peloton slashing the price of original bikes by more than 20%, or $400 from $1,895.

We wish the company good luck with this desperation strategy, and with its laughable expectation to return to adjusted Ebitda profitability for FY 2023. It will need it.

 

 

Tyler Durden
Thu, 08/26/2021 – 16:22

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