Peloton (PTON) Q2 Earnings Beat, Stock Tanks on Dismal Guidance
Peloton Interactive, Inc. PTON reported second-quarter fiscal 2024 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate. Despite reporting better-than-expected results, the company’s shares tanked 24.3% on Feb 1, as the company’s guidance hurt investors’ sentiment.
Earnings and Revenues
PTON reported adjusted loss per share of 54 cents, narrower than the Zacks Consensus Estimate of a loss of 55 cents. Revenues for the quarter under review came in at $743.6 million, beating the Zacks Consensus Estimate of $741 million.
It reported Connected Fitness segment revenues of $319.1 million, down 19.5% year over year. However, Subscription revenues increased 3.2% year over year.
Peloton Interactive, Inc. Price, Consensus and EPS Surprise
Peloton Interactive, Inc. price-consensus-eps-surprise-chart | Peloton Interactive, Inc. Quote
Operating Metrics
At the close of the quarter, Peloton recorded 3 million Ending Paid Connected Fitness Subscriptions, marking a net gain of 40 thousand during the quarter. The average net monthly paid Connected Fitness subscription churn stood at 1.2%. This positive churn result can be attributed to fewer-than-expected new subscription pause requests and a quicker-than-anticipated reactivation of subscriptions paused due to its seat-post recall.
Concluding the quarter, it registered 718 thousand Peloton App subscribers, reflecting a net decrease of 44 thousand during the quarter.
Costs
In the three months ending on Dec 31, 2023, total operating expenses, incorporating restructuring and impairment expenses, amounted to $486.5 million compared with $566.4 million in the prior-year quarter. General and administrative expenses saw a decline of $31.9 million to $160.8 million compared with a year ago. The fall was primarily attributed to a reduction in legal and other professional fees by $25.0 million, along with a decrease in stock-based compensation expenses.
Outlook
For third-quarter fiscal 2024, management expects Ending Paid Connected Fitness Subscriptions in the range of 2.99-3.01 million, remaining flat from the prior-year levels (from midpoint of guidance). On the other hand, Ending Paid App Subscriptions is suggested in the range of 0.73-0.75 million. Revenues for the quarter is projected to be between $700 million and $725 million, down 5% (from midpoint of guidance) from the year-ago levels.
For fiscal 2024, the company forecasts Ending Paid Connected Fitness Subscriptions in the range of 3.05-3.06 million, remaining unchanged from the prior-year levels. On the other hand, Ending Paid App Subscriptions is envisioned in the range of 0.70-0.80 million, down 8% (from midpoint of guidance) from the year-earlier levels. Revenues for the quarter are expected to be between $2,675 million and $2,750 million, down 3% (from midpoint of guidance) from a year ago.
The company currently has a Zacks Rank #3 (Hold).
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