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Peloton Lowers FY21 Revenue Guidance Marginally To Reflect Treadmill Recall Impact: Bloomberg – Stocks News Feed

  • Peloton Interactive Inc (NASDAQ: PTON) lowered the FY21 revenue guidance from $4.075 billion to $4 billion to reflect the short-term impact of the treadmill recall, Bloomberg reports.
  • The sales stoppage of the Tread+ and Tread and the recall costs is estimated to reduce revenue by about $165 million.
  • The U.S. Consumer Product and Safety Commission announced the recall of the products on Wednesday. 
  • The $4,295 Tread+ was allegedly linked to the death of a child and over 70 incident reports, including adults, children, pets, and objects. The touchscreen of the Tread was at risk of falling off.
  • The recall delayed Peloton’s expanded U.S. rollout of the Tread on May 27 while the company worked towards the safety improvements. The safety changes will mandate regulatory approval, software update, including a passcode requirement.
  • CEO John Foley initially snubbed the regulatory safety warnings followed by an apology and assurance regarding the company’s efforts towards damage control.
  • The treadmills accounted for a small fraction of the company’s hardware revenue, mainly generated from stationary bicycles. However, the treadmills were perceived as key growth drivers.
  • The company had a tough time delivering amid the pandemic-induced demand spike for home workouts.
  • Peloton estimated to sell three times as many bikes in the current quarter compared to the same period in 2019.
  • Peloton acquired fitness equipment maker Precor on April 1 and plans to produce a limited number of products at Precor’s North Carolina facility by the end of 2021.
  • Peloton’s Q3 sales rose 141% to $1.26 billion.
  • Connected fitness subscriptions signifying users who pay for classes on Peloton equipment rose 135% to 2.08 million, beating the analyst estimates. Paid digital subscriptions, suggesting users taking classes on smartphones, tablets, and other devices, rose to 891,000, exceeding the analyst estimate.
  • Credit Suisse told CNBC that the Peloton selloff is a buying opportunity.
  • Price action: PTON shares traded higher by 6.02% at $88.82 in the premarket session on the last check Friday.
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