Peloton’s holiday may have been weaker than expected, analysts say, prompting lower forecasts

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A Peloton Interactive Inc. logo on a stationary bike at the company’s showroom in Dedham, Massachusetts, U.S., on Wednesday, Feb. 3, 2021.
Adam Glanzman | Bloomberg | Getty Images

Peloton‘s troubles have lingered into the new year.

JPMorgan analyst Doug Anmuth said Wednesday that declining visits to Peloton’s website and higher-than-normal promotional activity prompted him to forecast bigger losses ahead for the connected fitness company.

Anmuth slashed estimates for revenue and subscriber growth in the fiscal second quarter, which ended in December. He expects Peloton’s second-quarter sales will inch up to $1.1 billion from $1.06 billion last year. Previously, he saw sales touching $1.2 billion.

Weighing on sales growth are slowing subscriber acquisitions. He expects Peloton to report 2.79 million connected fitness subscribers, with 300,000 net new adds in the second quarter. Previously, he forecast 2.83 million subscribers.

Both of these estimates are below Peloton’s internal expectations. The company has guided for between $1.1 billion and $1.2 billion in sales, and between 2.8 million and 2.85 million subscribers.

For the full year, Anmuth sees sales amounting to $4.2 billion, down from a prior forecast of $4.6 billion. He expects Peloton’s subscriber base to grow 42% year over year, down from an earlier estimate of 47%. That’s a marked deceleration from prior years. In 2021, Peloton grew subscribers by 114%. In 2020, that base increased 113%.

In early November, Peloton lowered its 2022 revenue expectations to between $4.4 billion and $4.8 billion, down from $5.4 billion. It cut expectations for subscribers to a range of 3.35 million to 3.45 million, down from 3.63 million. 

Peloton likely faces soft consumer demand in the near term and uncertainty in the back half of the year, Anmuth said. Citing Similarweb data, he said visits to Peloton.com on desktop computers and mobile devices dropped 5% in its second quarter, which ended in December, compared with the prior year.

Peloton declined to comment. It is expected to report earnings in early February.

Analysts losing confidence in the short term

Growth isn’t coming as easy for Peloton as it did at the onset of the pandemic, when the company’s stock was also the ultimate stay-at-home play. Investors see it being challenged by competition from other at-home fitness options and gym chains such as Planet Fitness and New York City-based Equinox. This has forced Peloton to spend more to acquire new customers.

Peloton needs to create new workout devices in order to lure in people who don’t have an interest in its bikes or treadmills. Or, it must entice existing subscribers to build out their home gyms. It’s also eyeing international expansion as another lever for growth. That will come at a cost, at least in the short term.

Anmuth cut his December 2022 price target for Peloton shares to $50 from $70. That’s still about 48% upside from Tuesday’s closing price of $33.82. Earlier Tuesday, Peloton’s stock hit a 52-week low of $32.39, amid several days of continued losses in market value. But, on Wednesday, shares were down slightly.

Analysts who cover the company expect the stock to bounce back. The stock’s average price target is $72.42, according to FactSet. BMO Capital Markets analyst Simeon Siegel has the lowest target of the group, at $45. But that’s still above where shares are trading currently.

At this point, Peloton has nearly wiped out its pandemic-fueled stock gains. In 2021, shares tumbled 76%, after rising more than 440% in 2020.

Early last week, Raymond James analyst Aaron Kessler also said he expected a disappointing December, which could prompt the company to cut its full-year forecast again.

“When Peloton provided guidance, we believe the company was assuming a return to stronger seasonality in the December quarter following the slower summer seasonality,” said Kessler in a note to clients.

Net subscriber adds in the second quarter could come in closer to 220,000, he said. Raymond James has a “bear case” rating on the stock of $27 and a “bull case” rating of $51. Kessler said a fair value would be about $38 per share.

Two days later, Baird analyst Jonathan Komp cut his price target for Peloton shares to $70 from $90. The firm also removed Peloton from its “fresh pick” list.

“Several indicators have reduced our confidence in near-term estimates,” said Komp in a research note. However, he said that he’s more optimistic about Peloton’s longer-term prospects in the booming health and fitness industry.

Similar to JPMorgan’s Anmuth, Komp said net subscriber adds in the second quarter could be around 300,000 and miss the company’s provided expectations.

He also said Peloton’s instructors have not been gaining as many followers on social media platforms of late. This is something that has been indicative of the company’s performance in the past, he said.

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