Peloton Narrows Loss, Revenue Surges on Connected Fitness

Peloton posts better-than-expected fiscal-third-quarter results. The shares are lower.
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Peloton Interactive  (PTON) - Get Report reported better-than-expected fiscal-third-quarter results as connected-fitness revenue surged, but the results were shadowed by the company's recall of its Tread+ and Tread treadmills one day earlier.

Shares of the New York company at last check were 6% lower at $78.79.

Peloton reported its net loss narrowed to $8.6 million, or 3 cents a share, from $55.6 million, or 20 cents a share, in the year-earlier quarter. 

Analysts surveyed by FactSet were expected the company to report a loss of 12 cents a share.

Revenue more than doubled -- up 141% -- to $1.26 billion, while the FactSet consensus called for revenue of $1.12 billion.

Revenue was driven by strong demand for connected-fitness products; faster deliveries resulting from investment in expedited shipping, and sustained low levels of customers leaving the platform for rival services, the company said.

Revenue in the connected-fitness segment was $1.02 billion, up 140% year-over-year. It accounted for 81% of total revenue.

Connected-fitness-subscription workouts tripled (up 239%) to more than 149.5 million. The monthly average was 26 workouts per subscription, compared with 17.7 a year earlier.

The company said in its shareholder letter that it had "invested aggressively in the continued expansion of our supply chain."

"[These] investments have yielded significant improvements for our members, as average wait times for our original bike are now back to pre-COVID-19 levels," the letter said. 

On Wednesday, Peloton shares fell and the company and the U.S. Consumer Product Safety Commission announced a recall of the company's Tread+ and Tread treadmill machines.

The CPSC did not originally request a voluntary recall for the Tread.

A 6-year-old died after being pulled under the rear of a Tread+ and the CPSC said Peloton has received 72 reports of adult users, children, pets or objects being pulled under the rear of the Tread+.

Last month, the commission issued an urgent safety warning about the Tread+ and urged owners with small children and pets to stop using the devices immediately.

The treadmill recall involves Model No. TR02. The CPSC said there were 18 reports of the touchscreen loosening and six reports of the touchscreen detaching and falling. 

No injuries have been reported in the U.S., but there have been reports of minor injuries such as abrasions, minor cuts, and bruises in Canada and the United Kingdom, the CPSC said.

Following the announcement, Bank of America analyst Justin Post downgraded Peloton to neutral from buy and lowered his one-year price target to $100 from $150 amid changes to what he said was his "upside thesis" on the company’s financial prospects.

In February, Peloton reported fiscal fiscal-second quarter results that topped analyst estimates.