Wild week for Peloton: Shares slide 13% after 20% spike

NEW YORK — Peloton shares are on a wild ride this week, running up 20% Wednesday on a new partnership with Amazon, then sliding 13% before the opening bell today after quarterly earnings revealed a tough economic environment for the connected exercise equipment maker.

Losses are growing faster than expected and sales slumped 28% compared with last year when many people were still sheltered at home and staying out of gyms.

Peloton Interactive Inc. is a company in transition, attempting to achieve sustained free cash flow growth with sales falling and competition growing. Peloton’s early roaring success drew in competitors who peeled away customers by selling cheaper bicycles and exercise equipment. High-end gyms also jumped into the game, offering virtual classes that once were Peloton’s biggest draw.

The company’s net loss in its fiscal fourth quarter was $1.24 billion, or $3.68 per share, far greater than the per-share loss of 71 cents Wall Street had anticipated, according to FactSet, and about four times last year’s quarterly loss of $313.2 million.

Revenue slid from $936.9 million, to $678.7 million in this year’s quarter.

“When you look at our financial performance in Q4, I suspect what you see will be a function of where you sit,” said CEO Barry McCarthy in a prepared statement. “The naysayers will look at our Q4 financial performance and see a melting pot of declining revenue, negative gross margin and deeper operating losses.”

McCarthy said the company is making significant progress and pointed to new leadership, better supply contracts and potentially lucrative partnerships.

On Wednesday Peloton bikes and accessories went up for sale on Amazon.com, breaking with a direct-to-customers model that the company has employed since its founding.

Wall Street was clearly back in the naysayer camp today, sending shares of Peloton down sharply in premarket trading, and threatening to wipe out Wednesday’s gains.

It’s been a tumultuous year for Peloton and a difficult restructuring. The company’s co-founder stepped down in February acknowledging that he had overestimated Peloton’s growth potential and handed the reins to McCarthy.

Peloton was a star on Wall Street during the pandemic. Shares surged more than 400% in 2020 amid COVID-19 lockdowns that made its bikes and treadmills popular among customers who pay a fee to participate in interactive workouts.

The company has shifted its focus to its interactive programming, relying more on subscription revenue. In the most recent quarter, subscriber revenue was $383 million, outpacing $296 million in equipment sales.

But transitioning the company’s focus from hardware to software is costing Peloton a lot of money.

Peloton burned through $412 million in cash in the most recent quarter. It burned through $650 million in the second and third quarters.