Peloton facing 'uncertain' future as share price plummets

Peloton is facing an “uncertain” outlook after the business posted another period of losses and its share price plummeted. 

The indoor exercise bike brand released its financial report for the final three months of 2023 on Thursday, revealing a year-on-year decline in revenue from $792.7m (£627.5m) to $743.6m (£582.5m), and a net loss of $194.9m (£152.7m). 

This coincided with the company’s share price nosediving 24% to $4.21 (£3.30). As a result, Peloton’s valuation stands at $1.5bn (£1.18bn), a significant fall from its all-time high of almost $50bn (£39bn). 

“While we continue to outperform the connected fitness market, our biggest challenge continues to be growth, at scale,” Peloton CEO and president Barry McCarthy wrote in a letter to shareholders. 

“If we're not failing, we're not being aggressive enough testing new initiatives.”

McCarthy noted strong sales from third-party retailers like Dick’s Sporting Goods and Amazon and growth in the company’s bike rental offering. 

The number of paid app subscribers, however, is falling. Peloton ended the quarter with 718,000 paid members, down 16% year on year. 

The CEO criticised the company’s customer service support, saying this area of the business “failed to meet our performance expectations” and “tarnished” the brand. 

“When I first joined Peloton, I spoke publicly about two primary goals for the business: stop the bleeding and return the business to growth,” McCarthy wrote. “My primary goal for FY24 has been to restore the company to positive free cash flow for the full year. 

"Based on our updated forecast, we now expect the business to generate positive free cash flow in Q4 but to fall short of achieving our goal for the full year. 

“We also expect to end the fiscal year with a net increase in unrestricted cash compared to our Q2 balance. If we grow our cash balance and generate free cash flow, we will have stopped the bleeding. As for the goal of restoring revenue growth, we expect to meet that goal in 4Q24 [by the end of June].”

The company enjoyed booming success during Covid lockdowns, but has since suffered as gyms reopened and people have returned to normal life. 

Looking forward, Peloton’s chief financial officer, Liz Coddington, said: “Our outlook is tempered by uncertainty surrounding our ability to efficiently grow Paid App subscribers and the performance of other new initiatives, as well as an uncertain macroeconomic outlook.”

Still, Coddington concluded, “we remain confident in our key growth initiatives”.