Peloton (Nasdaq: PTON) shares were higher following the company's fiscal Q3 results which showed a miss on the top and bottom line. For bulls or traders looking for a bounce from oversold levels, the bullish price action could be construed as a reflection that the bad news has been priced into the stock.
The stock opened lower following its earnings report but closed positive on the day. Currently, it's up about 30% from its lows and has shown relative strength vs the market for the first time since late 2020. It still faces some serious challenges with many believing the company has no path to profitability, and there is always the risk of a loss in subscribers. The stock is down more than 90% from it's all-time high in January 2021. Bulls have to hope that there are some signs of a turnaround in the earnings report.
Inside the Numbers
In its fiscal Q3, Peloton reported a steeper loss than expected a $2.27 per share loss vs a $0.83 per share loss. Revenue was down from last year's $1.26 billion to $964 million. Analysts were looking for $972.9 million.
For the quarter, it had $594 million in sales from its connected fitness products and $370 million from subscriptions. In total, it has 2.96 million subscribers with 195,000 added in the quarter. The churn rate didn't spike as expected and was 0.74%.
The company said the decline in revenue was due to less demand as people returned to more normal behavior including going back to the gyms. Another challenge is that inventories are piling up in warehouses.
Peloton also issued an underwhelming outlook for its next quarter as it doesn't see demand improving. The company is planning to increase the price of its subscriptions which it said could lead to some cancellations. It sees revenue between $675 million and $700 million, while analysts were looking for $821 million.
Another interesting remark was from new CEO Barry McCarthy that the company is focused on improving its capital structure as the company is down to $870 in cash. Currently, the company is still able to tap financing as it was able to borrow $750 million for 5 years in a deal that was oversubscribed.
The company's current priority is on becoming free cash flow positive by next year. Some steps it's taking are to sell through 3rd party retailers and look for ways to increase subscriber revenue. Previous steps include cutting the prices of its bikes and treadmills.