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Peloton Stock Faces $8.5 Billion Wipeout As Home Fitness Craze Fades, Sales Forecasts Slashed

Peloton shares could lose a third of their value Friday as investors re-set assumption for its post-pandemic profits following a steep reduction in 2022 sales forecasts.

Peloton Interactive  (PTON) - Get Free Report shares plunged in pre-market trading Friday, potentially wiping out more than $8.5 billion in value, after the company slashed its 2022 sales forecast amid a slump in post-pandemic demand for its home fitness equipment.

Peloton posted a net loss of $376 million for its fiscal first quarter, which ended in September, amid the slowest sales growth in more than a year and said 2022 revenues would likely come in between $4.4 billion and $4.8 billion, a $1 billion reduction from its prior forecast.

Adding to its demand woes, Peloton said the $400 price cut to its signature bike, rising freight costs and supply chain disruptions -- alongside costs linked to its treadmill recall -- would squeeze profit margins for the remainder of its fiscal year.

"Our baseline traffic forecast reflected our unchanged view of the growing consumer interest in Connected Fitness, our growing market share in the category, our leading brand awareness and expected increased word-of-mouth," CFO Jill Woodworth told investors on a conference call late Thursday. "However, it is clear that we underestimated the reopening impact on our company and the overall industry."

Peloton shares were marked 31.3% lower in early trading Friday to change hands at $59.17 each, a move that extends the stock's year-to-date slump to around 60%.

In addition to the reduced forecast, Peloton reported a wider-than-expected loss for its fiscal first quarter on lighter-than-expected revenue. The company said it lost $1.25 a share on revenue of $805.3 million. Analysts surveyed by FactSet were expecting the company to lose $1.10 a share on sales of $809 million. 

"Last night's results suggest Peloton's post-pandemic surge has dissipated, pressuring its ability to forecast, ironic as most consumer companies are now cheering visibility ... a fact echoed through price cuts, as everyone flags inflation/scarcity," said BMO Capital Markets Simeon Siegel, who carries an "underperform" rating with a $45 price target on the stock. 

"We worry lowered numbers remain too optimistic and that the biggest issues may actually lie ahead— in racing to meet pandemic-driven demand, the company embarked on a massive investment spree (Tonic, Precor, POP) dwindling cash and ballooning inventory just as demand tapered," he added.