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Peloton Drops Despite Logging First Billion-Dollar Sales Quarter

Peloton reported a 472% increase in paid digital subscriptions year-over-year.
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Shares of Peloton  (PTON) - Get Free Report dropped after hours Thursday despite the exercise equipment maker reporting fiscal second quarter results that topped analyst estimates. 

The New York-based company reported revenue of $1.06 billion, a 128% year-over-year increase, on earnings of 18 cents per share after reporting a net loss in the year ago period. 

Analysts were expecting revenue of $1.03 billion and earnings of 9 cents per share. 

For the third quarter, the company expects revenue of $1.1 billion, which is ahead of analyst estimates of $1.09 billion. 

The second quarter was the first time the company reported more than $1 billion in revenue in a single quarter. 

The company saw a 134% increase in connected fitness subscriptions to 1.67 million, while paid digital subscriptions grew 472% year-over-year to about 625,000. Total membership grew to over 4.4 million. 

Subscription revenue grew to $194.7 million, representing a 152% increase year-over-year and 18% of the company's total revenue. 

During the quarter, Peloton signed a deal with singer Beyoncé to help drive subscriptions. The company reported that the Beyoncé-themed classes drove over one million workouts in the quarter and included its largest live audiences to date for Yoga and Bike Bootcamp. 

Despite the positive results, Peloton shares were down 6.0% to $148.10 after hours, after closing Thursday's session up 7%. 

Last month, analysts at UBS downgraded the stock to sell from neutral.

UBS analysts wrote in a commentary that “while we still think Peloton has a long-term opportunity to disrupt traditional fitness business models, we downgrade it to sell, risk/reward skewed to the downside from current levels.”