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Peloton's Market Cap Sheds $10 Billion
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Hey Friends,
Peloton shares tanked nearly 35% last night after the company revealed weakening sales growth, a wider-than-expected loss in its fiscal first quarter, and slashed its outlook for full-year 2022.
Here are the details:
Revenue was up 6% at $805 million
Nearly 2.5M connected fitness subscribers — up 87% YoY
Subscription revenue grew 94% to $304 million
But Peloton also missed revenue expectations—$805 million actual vs. $810 million expected—and reported a net loss of $376 million, or $1.25 per share, compared with net income of $69.3 million, or earnings of 20 cents a share, a year earlier.
The result? Peloton shareholders saw their equity drop 33% of its value overnight, bottoming out at $57/share and now down 66% from its all-time high of $167.
Peloton ($PTON) Stock Price
November 2019: $27/share
December 2020: $167/share
November 2021: $57/share (-66% from Dec. high)
And here’s how their market cap has trended over the same period.
Peloton Market Cap
November 2019: $7 billion
December 2020: $50 billion
November 2021: $17 billion (-66% from Dec. high)
After the news was announced yesterday, and the stock shed nearly $10 billion of its market cap within minutes, the Peloton bears were having a field day on Twitter.
You could find comments like “Shocking! A stationary bike with an iPad isn’t a $30 billion company,” but this meme might have been my favorite.
Even worse, on the same day that Peloton saw its stock crater over 30%, Planet Fitness soared to a new all-time high, further proving that people are transitioning back to public gyms as pandemic restrictions continue to ease.
Planet Fitness is now up 171% from its pandemic low of March 2020.
Of course, there is nuance to this. With quarterly revenue up 6% year-over-year, Peloton is still growing at a solid rate.
Connected fitness subscribers, or the people who own a Peloton product & also pay a monthly fee for content, are up 87% year-over-year. Monthly churn is still extremely low, and, to be honest, the unit economics are still very attractive.
But this is much more about the post-pandemic return to normalcy. At the same time that brick-and-mortar gyms like Planet Fitness and Equinox are seeing their member check-in numbers skyrocket, Peloton is simultaneously watching their average monthly workouts per subscriber plummet.
For example, six to nine months ago, at the height of pandemic restrictions here in the United States, the average Peloton member was working out 26x per month.
Today, that number is 16x per month — down nearly 40% from its high.
This is a notoriously tricky quarter for consumer-based products, and the widely-reported supply chain constraints don’t help either.
Still, not only were investors expecting Peloton to emerge from the pandemic with a strength-based offering, but seeing quarterly revenue dive off a cliff doesn’t help either.
Peloton Quarterly Revenue
Q1 2021: $757 million
Q2 2021: $1.06 billion
Q3 2021: $1.26 billion
Q4 2021: $936 million
Q1 2022: $805 million
At a 25x price to sales ratio earlier this year, the company was priced to perfection.
We’ll see how this plays out. One way or another, it will be a fascinating case study.
Peloton is attempting to fundamentally change the way people think about exercise forever, but the $100 billion global gym industry surely won’t go down without a fight.
I hope each of you has a great weekend, and I’ll talk to everyone tomorrow.
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THE JOE POMP SHOW: Episode #2 is with Rich Kleiman, the longtime manager and business partner of Kevin Durant.
Kleiman & Durant have co-founded multiple businesses together, including The Boardroom, a media company at the intersection of sports, music, art, and culture, and Thirty Five Ventures, an investment vehicle they have used to make over 75 investments in companies like Coinbase, Postmates, WHOOP, Robinhood, and more.
In this conversation, we discuss:
Working with professional athletes
Building a media company
How Rich evaluates potential investments
The impact playing for the Warriors had on their business
How athletes think about money
What Rich would do differently if he had to start over
Listen, Subscribe, and Enjoy!