Peloton Interactive Inc (NASDAQ:PTON) has been hit by a wave of investor concerns after a disappointing earnings report and a bleak growth outlook.
Analysts at Bank of America downgraded the company's stock from Buy to Neutral on Thursday and slashed the price objective from $13 to $6.50.
The move came after Peloton's fiscal fourth-quarter results were largely below expectations. While the company's revenue for the quarter came in at $642 million, in line with street estimates, its gross profit of $201 million fell significantly short of the analyst's estimate of $264 million resulting from charges stemming from a recall and hardware write-downs.
Additionally, the adjusted EBITDA loss of $35 million missed the analyst's estimate of a $16 million loss.
Bank of America’s concerns deepened with the release of Peloton's growth outlook and guidance. The company's first-quarter revenue guidance of $580-600 million falls below street estimates of $644 million. What’s more, Peloton refrained from providing a full-year free cash flow outlook, raising questions among investors about the company's financial performance for the coming year.
Analysts also expressed concerns regarding Peloton's ability to sustain subscriber growth and meet profit expectations, citing challenges related to recalls and hardware issues.
"While we still see real value in the subscriber base (using a 1.2% monthly avg churn we get 42 month average subscriber lifetime or $1,350 gross profit per sub, yielding $4 billion in potential value), we have less confidence in subscriber growth drivers from here,” analysts noted.
“We expect app users, FaaS growth, partnerships, Intl marketing to drive gross adds, but higher churn will limit net sub growth…we think a discount is warranted given lower EBITDA margins & FCF generation, and limited subscriber growth in our outlook.”