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Investors aren’t too happy Peloton (PTON) is slashing the price of its entry-level connected bike for the second time in less than a year, which will take a toll on the bottom line over the next 12 months.
But from Peloton’s perspective, it was all part of the plan even if investors weren’t aware of it.
“If you look back over the past few years, our goal has always been to make our products more accessible. We introduced 0% TAP financing four years ago. We introduced a free 30 day home trial a few years ago. also reduced the price of our digital app, ”Peloton CFO Jill Woodworth told Yahoo Finance Live.
Woodworth continued, “As you can imagine over the past few years we’ve basically sold all the bikes we could make. And over the past couple of months, of course, the pandemic has forced us to really grow our base. manufacturing eight or nine times during the pandemic. And so we’re finally in a place from an inventory standpoint where we can actually adopt a dramatic price change to really open up the accessibility of our products. excited about it. “
Peloton said it will reduce the price of its bike from $ 400 to $ 1,495 because it focuses more on acquiring new subscribers than on profitability. The bike’s original price was $ 2,245 in September 2020, just before a top-of-the-line version was released.
Woodworth declined to say whether Peloton would reduce the price of its treadmill, which costs more than $ 4,000 for the high-end Plus version.
Suffice it to say, investors see it differently, especially as the company experienced a slowdown in subscriber growth in its final quarter, which has rekindled concerns about competitive pressures. increased.
Peloton shares fell about 10% to $ 105 in Friday’s news session. The stock has lost 30% so far in 2021, underperforming the S&P 500’s 19% gain.
Here’s how Peloton performed in its fiscal fourth quarter compared to Wall Street analyst estimates:
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Net sales: $ 936.9 million versus $ 929.1 million
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Adjusted operating profits: loss of $ 45.1 million vs. loss of $ 57 million
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Diluted EPS: loss of $ 1.05 per share vs. loss of $ 0.44
Peloton also presented a cautious outlook for its new fiscal year, reflecting lower prices for its bike, manufacturing investments and costs related to the recall of its treadmill.
Analysts have generally had brutal positions on the stock after the mixed quarter and forecasts for the year much worse than expected.
“When businesses have little competition, they don’t need to market or promote. When competition arises, the need for marketing and discounts also increases. Competition is intensifying and Peloton’s second price drop in a year, coupled with higher marketability, may be more significant. inventory and competition higher than its democratization of fitness. After all, if management saw a SAM of 20 million units [software addressable market] at previous prices, why discount now? Said Simeon Siegel, analyst at BMO Capital Markets.
Siegel maintained an underperformance rating on Peloton stock.
“Recommend the bike, especially for $ 1,495, worried about the stocks,” Siegel noted.
Brian Sozzi is an editor and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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