After the earnings report was released, investors "voted with their feet": Is the internet celebrity Peloton really bad?

The once smashing “home-home” fitness concept has been sought after by consumers and Wall Street with the outbreak of the epidemic. During the period from April to December 2020, the stock has soared by 471.45%, but it has fallen by 24.80% so far this year. The stock closed at $114.09 per share on Thursday.

The decline seems to be far from over, the stock continued to fall 6.27% after the market on Thursday.

Peloton said after the market on Thursday that the company plans to significantly reduce the price of its spinning bikes again. The price of Peloton's flagship bikes will be reduced from $1895 to $1495. In addition, the company also released a quarterly loss that surprised the market. The quarterly loss was US$312.2 million, or a loss of US$1.05 per share, and revenue was US$937 million, which was also higher than the market’s consensus estimate of US$928.6 million.

Peloton said the price cut will make the company's bikes more accessible. In addition to lowering prices, the company has also improved its consumer finance plan, increasing the monthly installment payment from 39 months to 43 months, which will reduce the financial burden of consumers buying the company's high-end spinning bikes and treadmills.

This week, the company announced that it will re-sell the low-end treadmill product line "Tread". Earlier, this product had a defect that the display was detached, and sales had to be suspended. The company's other high-end treadmill "Tread +" previously caused the death of a child, and sales of this product are still suspended.

Wall Street analysts initially agreed with this statement, believing that the company's price cuts would help expand the market. However, when the company warned that the latest price reduction measures may affect this year's profit margins, investors still chose to "vote with their feet."

Moreover, Peloton also disclosed that the company found a problem with its inventory accounting method. "As of June 30, 2021, it was found that the company's internal control of financial reporting had major flaws." However, the company stated that this will not affect its previously announced results. .

With the end of the epidemic, more and more consumers choose to return to the gym or participate in offline courses, which is also a potential crisis that Peloton is facing.

According to the results of survey analysts, there are currently 21 analysts on Wall Street giving the stock a "buy" rating, 5 analysts giving it a "neutral" rating, and 2 recommending a "sell" rating. The average 12-month target price for analysts is $133.46, which is 16.98% higher than Thursday's closing price.

Analysts are optimistic about Peloton and it is not entirely without reason.

The latest performance report shows that in Peloton's membership business, consumers will obtain real-time fitness content through treadmills and spinning bikes. In the last quarter, the total number of members reached 2.33 million, a year-on-year increase of 114%. The analyst's expected value is 2.28 million. In this fiscal year, the company predicts that the number of fitness class members will increase to 3.63 million.

In addition, the company's online fitness business increased by 35% year-on-year to 655.3 million US dollars, accounting for 70% of total revenue. Among them, subscription revenue increased by 132% to 281.6 million US dollars. Peloton also said that the number of digital subscriptions that do not require equipment, driven by free trial activities, increased by 176% to 874,000.

Moreover, it is worth noting that the data also shows that people do not seem to be affected by the negative news about the product, and they have maintained the habit of exercising at home after the epidemic. The data shows that the company’s churn rate last quarter was only 0.31%, which is six. The lowest level in the year. However, the average number of exercises per month by Peloton users has indeed fallen from 24.7 a year ago to 19.9. The company said that people spend more time outdoors in summer, so this decline is seasonal.

The company predicts that this year's sales will reach 5.4 billion U.S. dollars, higher than market expectations of 5.27 billion U.S. dollars. At the same time, it is expected to return to profitability in 2023, at which time, expenditures including supply chain costs and capital expenditures will also slow down. In addition, online fitness users will reach 3.63 million.

In addition, by 2023, Peloton is expected to produce bicycles and treadmills at its first American manufacturing plant in Troy, Ohio. The company plans to invest US$400 million to establish a local supply chain to speed up delivery in the local market.

In addition to spinning and treadmills, Peloton is currently developing new fitness hardware, such as a rowing machine, and a wearable device that detects changes in heart rate.