Peloton shares tumbled 35% Friday after the at-home fitness equipment maker slashed its annual sales forecast by as much as $1 billion.
At least four Wall Street investment firms downgraded the stock after Peloton's dismal fiscal first-quarter financial report released Thursday.
While the company — and its share price — experienced incredible growth a year ago due to stay-at-home trends sparked by the coronavirus pandemic, that momentum is fading and more consumers are heading back to gyms. Planet Fitness, for example, said Thursday that its membership levels are almost back to a pre-pandemic peak. That stock hit an all-time high on the news.
"From forecasting consumer demands to accurately predicting logistics costs, our teams have never seen a more complex operating environment in which to guide our expected results this year," Peloton CEO John Foley said on the company's earnings conference call.
Foley added that Peloton has seen traffic to its website taper off faster than the company was anticipating in recent months. Shopper visits to its brick-and-mortar stores also underwhelmed, he said.
Putting even greater pressure on Peloton's profits, the company cut the price of its original Bike product by 20% in August. Executives said Thursday that the reduction helped to accelerate Bike sales, but that also means fewer people are choosing to buy its more expensive Bike+.
Considering its revised fiscal 2022 outlook, Peloton said it's looking to make "material improvements" to its cost structure, which includes "significant adjustments" to hiring plans.
"With the ongoing economic reopening and rising logistics costs presenting obvious near-term headwinds, we believe Peloton is likely to take a few quarters to get back on its feet," said analysts at Truist Securities.
Truist on Friday downgraded its rating on the stock to hold from buy, and lowered its price target on Peloton shares to $68 from $120. The stock closed Thursday at $86.06, down 43% for the year.
Meantime, Credit Suisse cut its target price to $112 from $148.
"Demand is coming in lower on all fronts leading us to wonder when we might see a return on all the capital they have deployed," analysts at the firm said in a note to clients. "Long term, the connected fitness opportunity could still be in tact but the path to get there appears more difficult."
Peloton now expects to have between 3.35 million and 3.45 million connected fitness subscribers by the end of June, down from an earlier target of 3.63 million.
Analysts at JPMorgan removed Peloton from the firm's focus list but maintained an overweight rating on the shares ahead of the holiday season. The group of analysts, led by Doug Anmuth, said it still believes Peloton's treadmill business could reach a market of consumers two to three times larger than its bike business.
"We believe Tread is off to a slower than expected start, but it remains early and sales have picked up since Peloton started marketing the product ~30 days ago," JPMorgan said.
The firm cut its price target to $90 from $138.
Peloton's stock has fallen 63% year to date.
— CNBC's Michael Bloom contributed to this reporting.
