Peloton (PTON) shares moved higher Friday, following a Thursday slump that wiped $2.5 billion from its market value, as the fitness equipment maker hit back at reports it's prepared to suspend production of its bikes and treadmills.
The group also published preliminary second quarter earnings projections, which included revenues of $1.14 billion and adjusted EBITDA in the region of -$270 million to -$260 million, firmly inside prior guidance of a loss of $350 million.
CEO John Foley called Thursday's CNBC report, which cited an internal memo saying the group was planning a two-month production pause amid a "significant reduction" in post-pandemic demand for its connected bikes and treadmills 'false', but noted the group will nonetheless 'reset' output levels and review the size of its workforce and take "significant corrective actions" to improve profits.
"We now need to evaluate our organization structure and size of our team," Foley said "And we are still in the process of considering all options ... to make our business more flexible."
"We are taking significant corrective actions to improve our profitability outlook and optimize our costs across the company," Foley said. "This includes gross margin improvements, moving to a more variable cost structure, and identifying reductions in our operating expenses as we build a more focused Peloton moving forward."
Peloton shares were marked 13.7% higher in early Friday trading to change hands at $27.60 each. The stock fell 24% yesterday, amid several halts by Nasdaq officials for extreme volatility, and changed hands at a two-year low of $23.25 each in the afternoon session.
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 -- as well as costs linked to its treadmill recall -- would squeeze profit margins for the remainder of its fiscal year.
Peloton shares from its Nasdaq 100, the Nasdaq Equal Weight Index and Nasdaq ex-Technology Index benchmarks following a year in which the stock lost more than 70% of its value.
The changes are set to take place on January 24. Peloton will publish its December quarter earnings on February 8.
"Peloton lies at the edge of an important precipice; a material strategic reset is likely required to stem meaningful cash-burn and faltering demand," said BMO Capital Markets analyst Simeon Siegel, who lowered his price target on the group to $24.00 a share with an underperform rating. "Yet, improved profitability demands sacrificing revenue.
"Connected Fitness is in its infancy, yet we believe Peloton estimates still appear too high," he added. "Is a revenue-compressed Peloton expense-restructuring story (this early) exciting? We have more questions than ever."
