Peloton shares are collapsing, momentum for its home fitness equipment is waning

Peloton Interactive Inc. stationary bikes are on display in the company’s showroom on Madison Avenue in New York, USA, on Wednesday, December 18, 2019.

Jeenah Moon | Bloomberg | Getty pictures

Peloton shares fell more than 30% in pre-market trading on Friday, reaching a 17-month low after the home fitness equipment maker reduced its annual sales forecast by as much as $ 1 billion.

At least four Wall Street investment firms downgraded the stock after Peloton’s dismal first-quarter financial report released Thursday.

While the company – and its stock price – experienced incredible growth a year ago due to trends in staying home, triggered by the coronavirus pandemic, momentum is declining and more consumers are heading back to gyms. Planet Fitness, for example, said Thursday that its membership level is almost back to a pre-pandemic peak. That stock hit a record high in the news.

“From predicting consumer requirements to accurately predicting logistics costs, our teams have never seen a more complex operating environment to guide our expected results this year,” said Peloton’s CEO John Foley at the company’s earnings conference.

Foley added that Peloton has experienced that the traffic to its website is declining faster than the company had expected in recent months. Shopper visits to their brick-and-mortar stores were also overwhelming, he said.

By putting even greater pressure on Peloton’s profits, the company lowered the price of its original Bike product by 20% in August. Leaders said on Thursday that the reduction helped accelerate Cykelsalget, but it also means that fewer people choose to buy its more expensive Bike +.

Given its revised fiscal 2022 outlook, Peloton said it seeks to make “material improvements” to its cost structure, which includes “significant adjustments” to employment plans.

“With the ongoing economic reopening and rising logistics costs presenting obvious headwinds in the short term, we think the Peloton is likely to take a few quarters to get back on its feet,” analysts at Truist Securities said.

On Friday, Truist downgraded its stock rating to refrain from buying and lowered its price target on Peloton shares to $ 68 from $ 120. The stock closed Thursday at $ 86.06, down 43% for the year.

Meanwhile, Credit Suisse lowered its target price to $ 112 from $ 148.

“Demand is falling on all fronts, causing us to wonder when we can see a return on all the capital they have invested,” said analysts at Credit Suisse in a note to customers. “In the long run, the connected fitness option may still be intact, but the road to it seems more difficult.”

The peloton now expects to have between 3.35 million and 3.45 million connected fitness subscribers by the end of June, which is a drop from a previous target of 3.63 million.

Analysts at JPMorgan removed Peloton from the company’s focus list, but maintained an overweight rating on the shares ahead of the holiday season. The group of analysts, led by Doug Anmuth, said it still believes Peloton’s treadmill business can reach a market with consumers two to three times larger than their bicycle business.

“We think Tread has a slower start than expected, but it’s still early and sales have increased since Peloton started marketing the product ~ 30 days ago,” JPMorgan said.

The company lowered its price target to $ 90 from $ 138.

– CNBCs Michael Bloom contributed to this reporting.

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