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Peloton Backpedals on Backlog Issues Despite Earnings Beat

Peloton Interactive falls after the popular exercise machine maker says it can’t keep up with demand and warns that profits will be squeezed in the near term.

Peloton Interactive  (PTON)  shares backpedaled on Friday, falling as much as 7% in premarket trading, after the popular exercise machine maker said it can’t keep up with demand and warned that profits will be squeezed in the near term.

Peloton reported its first quarter with sales of more than $1 billion and per share earnings that were double analysts' forecasts, but warned that Covid-19-related delivery delays would “… continue to present challenges to returning our delivery times to pre-pandemic levels,” putting a dent in future earnings.

The company said it would invest more than $100 million in air freight and expedited ocean freight over the next six months to improve delivery times.

For the current quarter, Peloton said it expects revenue of $1.1 billion. It raised its sales forecast for the full fiscal year to $4.08 billion, up from previous guidance of $3.9 billion.

While short-term negative, analysts were more focused on Peloton’s positives, including its strong sales and subscriber growth as well as in-the-works changes to its equipment that are expected to continue driving consumer demand.

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Analysts at Cowen took note of likely lower fiscal third-quarter profitability, given the cost required to reduce the bottleneck, though still raised their one-year price target to $177 from $175 amid strong sales and subscriber growth, and more consumer demand. The firm kept its overweight rating on the stock.

KeyBanc analysts, meantime, pointed out that Peloton’s backlog orders remain strong even as its made a point of articulating its order-to-delivery delays to consumers. 

“A $100 million investment in expedited shipping will put pressure on third-quarter margins, but supply chain commentary is finally favorable,” KeyBanc said in a research note. The firm also has an overweight rating on the stock with a $185 price target.

Canaccord Genuity, meanwhile, maintained its buy rating on Peloton with a one-year price target of $180.

Shares of Peloton were down 6.18% at $147.79 in trading on Friday. 

The stock has surged more than 380% over past 12 months.