- Peloton stock plunged as much as 20% to a record low on Tuesday after it missed fiscal third-quarter earnings estimates.
- The company also offered fourth-quarter revenue guidance that was well below analyst estimates.
- "We finished the quarter with $879 million in unrestricted cash and cash equivalents, which leaves us thinly capitalized for a business of our scale," Peloton's CEO said.
Peloton's post-pandemic decline continued on Tuesday, with the stock plunging as much as 20% to a record low after it reported fiscal third-quarter earnings that missed analyst estimates.
The fitness equipment maker's ongoing decline calls into question the sustainability of its business model at a time when consumers are itching to get out of their house rather than stay inside like they did for two years during the pandemic.
Here were the key numbers:
Revenue: $964.3 million, versus analyst estimates of $969.8 million
Earnings per share: -$2.27, versus analyst estimates of -$0.86
Q4 Revenue Guidance: $675 million to $700 million, versus analyst estimates of $823.7 million
Peloton's quarterly revenue was down 23.5% year-over-year, which is a trend new CEO Barry McCarthy is trying to reverse. Some steps taken over the past few months to try and reinvigorate growth at Peloton include a series of price cuts for its bike, combined with a $5 price increase to its monthly digital subscription.
But those changes won't get the company to profitability anytime soon, according to its own guidance. The company expects to record an adjusted EBITDA loss of up to $120 million in its fiscal fourth quarter.
What may be more concerning for Peloton investors than the decline in revenue is the capitalization of the company. In its third-quarter letter to investors, McCarthy said that given its scale, the company is "thinly capitalized."
"We finished the quarter with $879 million in unrestricted cash and cash equivalents, which leaves us thinly capitalized for a business of our scale," he said.
Recent reports suggest Peloton is looking for an equity investor to take a more than 10% stake in the company to boost its cash position.
Ultimately, McCarthy is focused on bringing Peloton back to positive free-cash-flow and returning the company to growth. But whether it can once again achieve the growth it experienced during the pandemic remains to be seen.
Investors are taking notice. Peloton stock is down 94% from its record high. The company, which at one point was worth nearly $50 billion at its peak, is worth about $3.5 billion today.
Shares pared losses Tuesday and were down 16.5% at $11.80.