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Peloton stock tumbles as sales drop 23% year over year

Yahoo Finance Live anchors discuss the plunge in stock for Peloton following first-quarter earnings.

Video Transcript

[AUDIO LOGO]

JULIE HYMAN: All right, we got some more movers to talk to you about. One of them is Peloton. The shares are plunging some 13%, following a big miss on the top line. Revenue down 23% year-over-year. Sales of connected fitness products also took a tumble, down 59% from last year.

So the actual bikes, they're not selling too well. And yet, the company's CEO Barry McCarthy talks about turning the ship in the shareholder level, which I know that for us, struck a bit of a dissonant chord, did it not, when we were talking about the earnings earlier today.

You know, the company's subscription revenue was up. But that hardware revenue is indeed a problem. And in the second quarter, Peloton said, its adjusted loss will be $100 million to $115 million. $97 million is the loss that analysts had been predicting.

BRIAN SOZZI: I'm gonna to go straight to camera for this one. Barry McCarthy, I know you consume our content. You follow it closely. I encourage you-- I encourage you to just stop with these shareholder letters. You know, I've talked to a lot of investors recently in your stock and analysts, they do not want to see these letters. You, my friend, are confusing them. You're giving a lot of mixed signals here.

And I think this is very much the case here where he's sucking people in with this letter, talking about a turnaround. And then at the end of the day, warning or dropping another major warning for the holiday shopping season. This is a company for the current quarter, that is now looking for adjusted operating profits of $260-- adjusted operating loss of about $267 million here.

So I just think these letters are ill timed. This is not what investors want to see from Peloton. They just want to see the numbers. Hop on the earnings call, do what you have to do, and then turn around the company at some point potentially. And let the numbers speak for themselves. You have to stop it these letters. Have to stop with them.

BRAD SMITH: It's extremely disingenuous. You said that you're beating the timeline here for the goal to turn Peloton around. There's still a massive turnaround that needs to take place when you've got, what, members that are declining quarter-over-quarter sequentially, by about 3%. You've got ending app subscriptions that are declining, 11% sequentially there. And then year-over-year, connected fitness product revenue, that's down 59%. 31% sequentially here.

And so there are so many different areas where the consumer has started to already unplug on the connected fitness device and now, perhaps lean back into some of the in-person or even just not a connected device but still leveraging a platform of some sort.

And perhaps that's where the lean in can be, it's and the platform that Peloton does have. And there are a lot of different courses that people tap into. But at the end of the day, it still comes down to, this is a company being-- this is a company that's still so much values that connected fitness device, continues to produce it, and continues to try and sell it. But people aren't, especially in a down economy, going to kind of hop on board for a $4,000-- $2,000, $3,000, $4,000 connected fitness device to move into their home.

JULIE HYMAN: Yeah, and as we know, Peloton has also been trying to sell those devices in new channels.

BRAD SMITH: Right.

JULIE HYMAN: And we did get a little bit of an insight into how that's been going on the conference call. Amazon, outperforming expectations, according to McCarthy, you talked about it on the call. Dick's is TBD. Remember, they're selling in Dick's Sporting Goods as well.

Apparently, the Amazon model is wholesale. Amazon actually buys the product and then the subscription gets activated when they-- when somebody buys that. In the Dick's model, the customer just buys it there. So the subscription gets activated right away. It's-- the timeline is a little bit different between the two. But overall, like--

BRIAN SOZZI: There's no ship turning.

JULIE HYMAN: --it's not helping.

BRIAN SOZZI: I mean, that's--

JULIE HYMAN: Yeah.

BRIAN SOZZI: --how this letter started out. "The ship is turning." And at the end of-- bottom the release, you're saying, you lose more money than you just did. And then also at the bottom of this letter, saying that fitness spending has proven to be resilient during previous recessionary periods. Sure, for a $20 Planet Fitness membership. But when you're selling $1,000-plus bikes, who the hell needs those? Nobody. And that's what these results and that's what this quarter says.

BRAD SMITH: All right, we're gonna continue to watch shares of PTO in the day. But you can sense the sentiment here at the desk right now.