Published - August 26, 2022 @ 12:48 PM (EET)

‍

In a race to save itself, Peloton Interactive Inc. (NASDAQ:PTON) is eschewing some fundamental aspects of its decade-old business model after posting a $1.2 billion loss in the most recent quarter.

While revenues fell nearly 30% to $678.7 million from the year-ago quarter, Peloton further warned it would spend more cash than it brings in for several more months.

To make matters worse, the company's gross profit turned negative with gross margin contracting from 27.1% to -4.4%, and gave a bleak forecast for the current quarter.

Shares of the company fell 18% following the report, marking the biggest one-day decline since 20 January.  Over the past twelve months, the stock is down more than 90%.

NOW WHAT

As demand for Peloton's bikes and treadmills has plunged and subscriptions for fitness classes stagnated, the fitness company said Thursday, that revenue would be $625 million to $650 million in the fiscal first quarter, far short of the $772 million analysts projected.

In a letter to shareholders, Chief Executive Barry McCarthy was blunt about the challenges but said that Peloton is making headway.

"The naysayers will look at our Q4 financial performance and see a melting pot of declining revenue, negative gross margin, and deeper operating losses.  But what I see is significant progress driving our comeback and Peloton's long-term resilience." - McCarthy

Prior to the earnings report, in a move that was widely viewed as an opportunity for Peloton to branch out and find new customers, Peloton said it would sell equipment and accessories on Amazon.com (NASDAQ:AMZN).  The stock briefly surged 20% before giving back the gains.

WALL STREET'S TAKE

Though the sentiment among investors might currently be very negative, the consensus among analysts is still a Moderate Buy rating based on six Buys, seven Holds, and zero Sells assigned in the past three months.

Elsewhere, Jefferies analysts Randal Konik wrote Thursday that dismal earnings and a bleak forecast from Peloton were proof that "consumers are headed back to the gyms, and in-home fitness is continuing to fade."  He recommended investors buy Planet Fitness stock instead.

‍

‍