Peloton stock bounces back after revised forecast calls for $4 billion in annual sales

Peloton PTON, +1.40% shares dove about 4% lower in the extended session Thursday after the company reported fiscal third-quarter losses despite sales doubling. The stock turned around to a 4% gain in after-hours trading, though, after executives discussed their revised forecast in a conference call Thursday afternoon.

While noting that a recall of its treadmill product would cost the company about $165 million in revenue in its fiscal fourth quarter, Peloton Chief Financial Officer Jill Woodworth still guided for fourth-quarter sales of $915 million and an annual total of $4 billion, not far off from the previous annual forecast for $4.08 billion in sales.

“Anticipated Bike and Bike+ sales have been tapering from COVID highs, and we’re expecting a gradual return to historical seasonal sales trends. However, our unit sales remained significantly higher than pre-COVID levels, [and we] expect global bike and bike close unit sales in Q4 fiscal ’21 to be over three times higher than they were in Q4 of fiscal ’19, two years prior,” Woodworth said.

Peloton reported third-quarter losses of $8.6 million, or 3 cents a share, up from a loss of 20 cents a share a year ago. Sales more than doubled to $1.26 billion from $525 million in the same period a year ago. Analysts on average expected a loss of 12 cents a share on sales of $1.12 billion.

Peloton was a hot product and stock as COVID-19 spread across the globe in 2020, with consumers rushing to buy its connected exercise bikes and treadmills and subscribe to its online courses as gyms were forced to close. The soaring demand for its products led to delays in manufacturing and shipping equipment. Peloton has tried to develop manufacturing in the U.S. instead of Asia and paid a pretty penny in shipping fees to address those problems.

In a letter to shareholders Thursday, Peloton executives said that delivery times for its original exercise bike product “are now back to pre-COVID-19 levels.”

“While progress has been made, additional work remains to reduce delivery times across the remainder of our product portfolio and regions,” the letter stated.

As executives sought to rectify their issues getting equipment into consumers’ hands, a problem with the product that had shipped suddenly popped up in recent months. After a child died and others were hurt in accidents involving its treadmills, Peloton faced off with the Consumer Product Safety Commission, initially calling the CPSC’s announcement of concern about the product “inaccurate and misleading” before announcing a recall earlier this week.

Peloton’s once-booming stock has been damaged by the recent uncertainty. After more than quadrupling in 2020 to reach a peak market capitalization of nearly $45 billion in December, shares have dropped more than 44% in 2021 for a valuation of less than $25 billion as of Thursday’s trading session.

The fulfillment and treadmill issues have clouded the picture of Peloton’s strong financial growth over the past year, and have averted investors’ eyes more to the future.

“We believe expectations remain muted and investors are largely focused on the FY ’22 outlook, and any commentary on F4Q backlog could help support the stock,” MKM Partners Managing Director Rohit Kulkarni wrote in an earnings preview this week. “We think the stock reaction will be based on revised FY ’21 guidance, commentary related to shipping delays & inventory availability and miscellaneous growth initiatives.”

Woodworth said that Peloton’s progress on building and delivering bikes led to $125 million in revenue that she had assumed would happen in the fourth quarter actually took place in third quarter. That helped explain the outperformance on sales in the quarter reported Thursday, as well as Peloton’s fourth-quarter guide of $915 million coming up short of analysts’ estimates for revenue of $1.17 billion.

Even with the recent turbulence, Peloton shares have more than doubled in the past year, gaining more than 122% as the S&P 500 index SPX, +0.82% increased 46.3%.