Risk/Reward Rating: Negative
Peloton reported its Q4 and full year 2021 fiscal results after the market closed on August 26, 2021. It provided disappointing guidance for the coming quarter and fiscal year 2022. The forecast for the current quarter is for revenue of $800 million which was 20% below expectations. In reaction, the stock fell 8.5% the following day. Adding to concerns for the future was the announcement of a $400 price cut (a 21% decrease) to $1,495 for its original Bike. With rapidly accelerating costs throughout its supply chain, slashing product prices will lead to reduced profitability.
In fact, the company is projecting an adjusted EBITDA (earnings before interest taxes depreciation and amortization) loss of -$325 million in the new fiscal year. The adjusted operating loss estimate comes at a time of rapid expansion plans for Peloton as the company projects capital expenditures to be $600 million in fiscal 2022. Additionally, their fiscal year 2021 saw heavy investment in capital expenditures and acquisitions which accounted for 77% of the total -$1.04 billion free cash flow for the year. As a result, 2022 is shaping up to potentially be the second straight year of -$1 billion plus cash outflows for Peloton. The company is clearly going all in on growth which creates a heightened level of execution risk going forward.
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