Twitter – Peloton investors rediscover gravity | Reuters
NEW YORK, Aug 27 (Reuters Breakingviews) – Peloton Interactive (PTON.O) is about to break a sweat. The company’s freewheeling growth showed a few weaknesses in its financial report for the three months to June 30, released on Thursday evening. With people tiring of their basements and regulators probing injuries associated with Peloton’s gear, investors in the roughly $30 billion online-exercise firm may be rediscovering gravity.
Revenue at the company led by John Foley grew more than 50% from the same quarter last year, to $937 million. But it fell by more than 25% from the previous quarter. The next day the company said the U.S. Department of Justice and Department of Homeland Security asked for information related to injuries on its machines. Shares fell as much as 9% on Friday.
None of that is good news for Peloton, and the disclosure of a material weakness in its internal controls, however easily remedied, is an embarrassment. But the biggest problem may be that the assist from the pandemic may now be over. Covid-19 accelerated demand for its bikes, treadmills and internet classes, persuading those thinking about stumping up for a pricey home exercise bike to take the plunge. In the full year to June, revenue more than doubled to over $4 billion. That early uptake, not to mention competition from other ways to get fit, could now leave a hole.
Meanwhile decreasing the price of its original bike by more than 20%, which the company also announced on Thursday, speaks to trying to crank up more demand. Peloton trades at an enterprise value-to-sales multiple of some 8 times versus less than 1 times at exercise-equipment seller Nautilus (NLS.N). On the other hand, gym operator Planet Fitness (PLNT.N) boasts a 17 times multiple.
Peloton belongs somewhere between those two. It’s no slouch as a business, but it’s no longer cruising with so little effort. Real-world bikers know they pay for every downhill with a climb.
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– Peloton Interactive said on Aug. 26 that revenue for the three months to June 30, its fourth fiscal quarter, was $937 million, an increase of 54% from the same quarter last year but a decrease of 26% from the preceding period. The company also said it would cut the price of its original bike to $1,495 from $1,895.
– The following day, Peloton said the U.S. Department of Justice and Department of Homeland Security have subpoenaed the company for documents and information relating to injuries from its exercise machines.
– On Aug. 27, the company’s shares were down nearly 9% to $104.05 at 10:08 a.m. EST.
Editing by Richard Beales and Marjorie Backman
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