Peloton topped revenue estimates for its fiscal second-quarter earnings, with an assist from Costco. Peloton stock, which had pulled back following a late-year charge on turnaround hopes, jumped near an early entry point.
The innovator of fitness equipment and apps cut costs and slowed attrition of subscriptions, topping estimates on some key financial metrics, even as earnings per share were more negative than forecast. New Chief Executive Peter Stern assumed the role on Jan. 1, after previously overseeing software and service subscriptions for Ford Motor's integrated services unit.
"We see significant opportunities ahead, but we have a steep hill to climb to reach sustained, profitable growth," the company said in a shareholder letter.
Peloton said that its new partnership with Costco drove more Bike+ unit sales during the quarter than any other third-party retailer. Meanwhile, Costco shares continued to power higher in a buy zone after posting strong January sales. Costco sales rose 9.2% from a year ago, including 7.5% comparable sales growth.
Loss Wider Than Expected, But Revenue Tops
Estimates: Analysts expected a narrower second-quarter loss of 19 cents a share vs. 54 cents a year ago. Revenue was seen falling to $653.3 million vs. $743.6 a year ago.
Results: Loss was 24 cents a share, worse than expected. Revenue fell 9.4% to $673.9 million, topping forecasts.
Details: Adjusted EBITDA — earnings before interest, taxes, depreciation and amortization — improved to $58.4 million vs. a year-ago $81.7 million loss. Peloton generated $106 million in free cash flow vs a year ago $37.2 million decline. Subscription revenue of $420.6 million dipped 1% from a year ago.
Paid subscriptions fell by 21,000 to 2.88 million, which was 19,000 above the high end of Peloton's outlook.
Outlook: Peloton said it's raising its full-year outlook for adjusted EBITDA by $60 million to a range of $300 million to $350 million. Peloton narrowed its revenue range to $2.43 billion to $2.48 billion. The midpoint is $5 million higher than the prior outlook but 9% below the year-ago figure.
Peloton Stock Surges
Peloton surged 14.8% to 8.70 in early Thursday stock market action. A move past the 50-day moving average could flash an early entry opportunity. The traditional buy point would be 10.89.
Costco stock flashed an early entry on Jan. 30 with a convincing move clear of its 50-day line. That followed a Feb. 4 breakout past a 1,008.25 buy point from a seven-week cup base. Costco rose 1.1% to 1,054.66 early Thursday. The buy point runs through 1,058.66.
Be sure to read IBD's The Big Picture column after each trading day to get the latest on the prevailing stock market trend and what it means for your trading decisions.
