Stationary bikes Peloton Interactive Inc. exhibited at the company’s showroom on Madison Avenue in New York, USA on Wednesday, December 18, 2019.
Gina Moon | Bloomberg | Getty Images
Peloton shares fell more than 30% in premarket Friday, hitting a 17-month low after the home fitness equipment maker cut its annual sales forecast by as much as $ 1 billion.
At least four Wall Street investment firms downgraded their stocks after Peloton’s dismal first-quarter financials were released Thursday.
While the company – and its share price – experienced incredible gains a year ago due to stay-at-home trends fueled by the coronavirus pandemic, that momentum is fading and more consumers are returning to gyms. Planet Fitness, for example, said Thursday that its attendance was almost back to its pre-pandemic peak. This promotion hit an all-time high in the news.
“From forecasting consumer demand to accurately predicting logistics costs, our teams have never seen a more complex operating environment in which to determine our expected results this year,” Peloton CEO John Foley said during a conference call on financial company reporting.
Foley added that traffic to Peloton’s website has been dropping faster than the company expected in recent months. Visits to his regular stores are also underwhelming, he said.
Putting even more pressure on Peloton’s profits, the company cut the price of its original bike by 20% in August. Executives said Thursday that the cut has helped accelerate bike sales, but it also means fewer people are opting for the more expensive Bike +.
Taking into account the revised outlook for fiscal 2022, Peloton said it intends to make “significant improvements” to its cost structure, including “significant adjustments” to its hiring plans.
“With continued economic opening and rising logistics costs representing clear short-term hurdles, we believe it will likely take Peloton several quarters to get back on its feet,” analysts at Truist Securities said.
Truist on Friday downgraded the stock to hold-to-buy and cut its target price for Peloton shares from $ 120 to $ 68. Shares closed at $ 86.06 on Thursday, down 43% year-over-year.
Meanwhile, Credit Suisse lowered its target price to $ 112 from $ 148.
“Demand is declining across the board, which makes us wonder when will we see a return on all invested capital,” analysts at the firm said in a note to clients. “In the long term, fitness connectivity may still be valid, but the road seems to be more difficult.”
Peloton is expected to have 3.35 million to 3.45 million connected fitness subscribers by the end of June, up from the previous target of 3.63 million.
Analysts at JPMorgan have removed Peloton from the company’s top priority list, but retained a higher rating on the stock ahead of the holiday season. A group of analysts led by Doug Anmouth said they still believe Peloton’s treadmill business can reach a consumer market two to three times larger than its bicycle business.
“We believe Tread is starting slower than expected, but still early, and sales have increased since Peloton started selling the product about 30 days ago,” JPMorgan said.
The firm lowered its target price to $ 90 from $ 138.
– CNBC Michael Bloom contributed to this report.