Peloton Interactive Inc‘s (NASDAQ: PTON) stock surged on Thursday, climbing around 22 per cent in premarket trading.
This increase came after the company released a promising Q1 2025 earnings report and announced Peter Stern, an executive from Ford (NYSE: F) with experience as the co-founder of Apple Fitness Plus, will join Peloton in January as its new CEO.
The company reported a net loss of just USD$1 million, a significant improvement from last year’s USD$159 million loss and much better than the USD$51.7 million loss analysts expected. Revenue also surpassed forecasts, reaching USD$586 million as the company continues cost-cutting measures and strategic adjustments to improve its financial performance.
Interim CEO Karen Boone highlighted Peter Stern’s expertise, explaining in an earnings call that he had successfully scaled over a dozen subscription services, including Ford BlueCruise, Apple iCloud, and Time Warner Cable Home Security. She added that Stern has been an enthusiastic Peloton user since 2016, underscoring his familiarity with the brand and its community.
Investor confidence rose with these results, particularly due to Stern’s upcoming leadership starting in January 2025. His background in customer-focused innovation and technology services has encouraged optimism about Peloton’s future growth. Market reactions indicate a positive outlook for Peloton’s operational stability and strategic direction, boosting the stock’s performance
Peloton raised its adjusted pre-tax earnings guidance by USD$40 million, setting a new target between USD$240 million and USD$290 million for the year, reflecting strong first-quarter performance. It also revised its free cash flow forecast, increasing it by USD$50 million to USD$125 million.
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Peloton projects revenue between $2.4B-$2.5B for 2025
Peloton expects to have between 560,000 and 580,000 paid app subscribers by the end of the current quarter. In its fiscal first quarter, Peloton reduced operating expenses by 30 per cent from the previous year, reporting nearly USD$116 million in adjusted earnings before interest, tax, depreciation and amortization (EBITDA) and almost USD$11 million in free cash flow. EBITDA is a metric closely monitored by investors to gauge its future value. For the current quarter, Peloton forecasts adjusted EBITDA between USD$20 million and USD$30 million.
The company raised its full-year adjusted EBITDA guidance for fiscal 2025 to a range of USD$240 million to USD$290 million, up from the previous USD$200 million to USD$250 million. The company projects revenue between USD$2.4 billion and USD$2.5 billion, in line with analysts’ expectations of USD$2.46 billion.
These gains result from Peloton’s cost-cutting plan and improvements in its hardware unit economics, which had previously been a financial drain. Chief financial officer Liz Coddington shared that Peloton’s payroll and staff compensation cuts are expected to save approximately USD$100 million annually. Additionally, Peloton decreased its sales and marketing expenses by USD$64 million, a 44 per cent reduction year over year, achieving the company’s lowest media spend since fiscal 2020.
In the fiscal first quarter, Peloton increased the recommended retail prices for its Bike and Bike+ in international markets and raised the price of its Row in North America.
The company also reduced discounts across its hardware lineup. These pricing changes, combined with an improved balance across its revenue streams, raised Peloton’s connected fitness margin to 9.2 per cent, up 6 percentage points from the previous year.
joseph@mugglehead.com
