Peloton shares plummet in value as company struggles to 'stop the bleeding'

There are troubling times for the indoor training company Peloton, whose share value tumbled this week amid declining revenues.

The US company, which sells static exercise bikes, treadmills, and subscriptions to its connected training platform, enjoyed a boom during the COVID-19 pandemic but has struggled since lockdowns, and the latest financial reports indicate a continued downward trend.

Revenues fell to $743.6m in the latest financial quarter to December, which represents a decline of 6% year-on-year and 34% from two years ago. Net losses hit $194.9m, although this was a move in the right direction after $335.4m was lost in the respective period for the previous year.

“While we continue to outperform the connected fitness market, our biggest challenge continues to be growth, at scale,” admitted Peloton CEO & President Barry McCarthy in a letter to investors.

McCarthy twice referred to a need to ‘stop the bleeding’. He voiced optimism for the path back to revenue growth but things appear to get worse before they possibly get better.

Peloton has downgraded its forecasts for the next financial quarters. It expects revenues to fall by a further 5% during the current quarter to March, and dropped revenue predictions for the financial year as a whole from between $2.7bn and $2.8bn to between $2.68bn and $2.75bn.

The market reacted coldly, and share prices took a tumble after the financials were made public on Thursday, dropping around 23% to $4.27. That would make for a $1.5bn valuation for a company once valued at almost $50bn.

McCarthy identified a few areas of disappointment, most notably in customer service. “The Member Support experience has tarnished our brand, and we simply must do better,” he stated in no uncertain terms before announcing a re-shuffle of that department.

Peloton grew its base of connected fitness subscribers in the last quarter but saw its app subscribers fall by 16%.

McCarthy insisted the company could return to positive free cash flow in the 2024 financial year, but not in line with targets, while also increasing unrestricted cash.

“If we grow our cash balance and generate free cash flow, we will have stopped the bleeding,” he said. “As for the goal of restoring revenue growth, we expect to meet that goal in 4Q24.”