Peloton Interactive Inc. sales more than doubled in the first three months of the year. However, the company posted a surprising loss for the Thursday period as it struggled to deliver products amid a pandemic-triggered surge in demand.
Peloton PTON, up 1.40% Thursday afternoon, reported losses of $ 8.6 million, or 3 cents per share, for the third quarter, compared to a loss of 20 cents per share a year ago. Revenue more than doubled from $ 525 million in the same period last year to $ 1.26 billion. Analysts were expecting an average profit of 20 cents per share of revenue of $ 1.12 billion.
Shares fell between 2% and 3% in after-hours trading immediately after the results were posted, after closing at $ 83.78 on a 1.4% gain.
Peloton was a hot product and stock when COVID-19 spread around the world in 2020. Consumers rushed to buy their attached exercise bikes and treadmills and to subscribe to their online classes because the gyms had to close. The increasing demand for its products resulted in delays in the manufacture and shipping of equipment. Peloton tried to develop manufacturing in the US instead of Asia and paid a pretty penny in shipping to address these issues.
As executives tried to fix their problems and get devices into the hands of consumers, a problem with the product being shipped suddenly surfaced in recent months. After a child died and others were injured in treadmill accidents, Peloton approached the Consumer Product Safety Commission, describing the CPSC’s concern about the product as “inaccurate and misleading” before announcing a recall earlier this week.
In a letter to shareholders on Thursday, Peloton executives said delivery times for the original exercise bike product are “now back to pre-COVID-19 levels”.
“While progress has been made, more efforts still need to be made to reduce lead times for the rest of our product portfolio and regions,” the letter reads.
Peloton’s once booming stock has been hurt by recent uncertainty. After stocks more than quadrupled in 2020 to hit a maximum market cap of nearly $ 45 billion in December, they fell more than 44% in 2021, a valuation of less than $ 25 billion corresponds to the trading day on Thursday.
The fulfillment and treadmill problems have tarnished the picture of Peloton’s strong financial growth over the past year and turned investors’ eyes more towards the future.
“We believe expectations remain subdued and investors are largely focused on the outlook for FY22. Any comment on the fourth quarter lag could help support the stock,” Rohit Kulkarni, managing director of MKM Partners, wrote in this week a profit preview. “We believe the stock response will be based on revised fiscal 21 guidelines, comments on shipping delays and inventory availability, and various growth initiatives.”
Peloton’s executives have not provided a revised forecast in their letter to shareholders, as they normally do. Instead, the letter said that a revised forecast would be provided for a conference call on Thursday at 5:00 p.m. Eastern.
Despite the recent turmoil, Peloton stocks more than doubled over the past year, gaining more than 122%, as the S&P 500 Index SPX rose + 0.82%, up 46.3%.