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Peloton cuts annual revenue forecast as demand falters, shares tumble

Published 02/01/2024, 07:12 AM
Updated 02/01/2024, 11:16 AM
© Reuters. FILE PHOTO: A stationary bicycle inside of a Peloton store is pictured in the Manhattan borough of New York City, U.S., January 25, 2022.  REUTERS/Carlo Allegri/File Photo/File Photo

By Kannaki Deka

(Reuters) -Peloton Interactive trimmed its full-year revenue forecast amid its two-year-long efforts to turn around the business, sending the exercise equipment maker's shares plunging about 23% on Thursday.

The company now expects full-year 2024 revenue to be between $2.68 billion and $2.75 billion, down from its previous forecast of between $2.70 billion and $2.80 billion.

"In lowering its guidance, Peloton (NASDAQ:PTON) is acknowledging that the pivot from a hardware-focused business to a subscription-based model is rocky," said Zak Stambor, senior analyst, retail & ecommerce, at research firm Insider Intelligence.

The company ended with 3 million connected-fitness subscribers in the second quarter, an about 1% increase from a year earlier and above FactSet estimates of 2.99 million.

"While it delivered better-than-expected gains in paid connected fitness subscribers, there are plenty of potential speed bumps ahead," Stambor said.

Peloton, which was one of the biggest beneficiaries of COVID-19 lockdowns, has signed partnerships with Amazon.com (NASDAQ:AMZN) and Lululemon Athletica (NASDAQ:LULU) to make its products and services more accessible.

It is also betting on a boost from the reintroduction of the high-end Tread+ priced at $5,995, two years after sales were temporarily halted due to safety concerns.

Still, demand for its equipment was lower than expected as inflation-weary customers pulled back on spending during the holiday season, typically its strongest for hardware sales.

"While our paid subscriptions for connected fitness outperformed our expectations, our hardware sales were a bit softer than we expected," Chief Financial Officer Elizabeth Coddington said on a call with analysts.

Peloton now expects to generate positive free cash flow in Q4 but said it would fall short of achieving positive free cash flow for the full year.

© Reuters. FILE PHOTO: A stationary bicycle inside of a Peloton store is pictured in the Manhattan borough of New York City, U.S., January 25, 2022.  REUTERS/Carlo Allegri/File Photo/File Photo

Revenue fell 6.2% to $743.6 million but beat analysts' expectations of $733.5 million, according to LSEG data.

The company said it expects third-quarter revenue to come in between $700 million and $725 million, below analysts' estimates of $753.8 million.

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