MW Peloton sees strong Tread demand as revenue beats by widest margin since 2019

By Tomi Kilgore

Stock soars toward a third-straight double-digit percentage gain after earnings

Shares of Peloton Interactive Inc. powered higher in early trading Thursday, after the at-home-fitness company raised its profitability outlook and reported fiscal second-quarter revenue that rose well above expectations.

The company saw particular strength in connected fitness, where product revenue doubled from the previous quarter. While subscriptions slipped, the rate of cancellations (churn) improved amid higher reactivations and increased marketing efforts.

The stock $(PTON)$ ran up 15.2% in premarket trading, which puts it on track for the biggest one-day gain since it shot up 27.8% on Oct. 31, the day fiscal Q1 results were released. The day fiscal Q4 2024 results were reported on Aug. 22, the stock rocketed a record 35.4%.

Revenue for the quarter to Dec. 31 jumped 26.9% from a year ago to $743.6 million, to beat the FactSet consensus of $652.7 million. The margin of the revenue beat, with results 13.9% above expectations, was the widest since the 14.5% top-line beat for the quarter ended September 2019.

Connected-fitness product revenue came in at $319.1 million, double that of the previous quarter, up 25.9% compared with a year ago and well above the FactSet consensus of $235 million. That margin of that beat was the most in at least five years, based on available FactSet data from February 2020.

"The holiday season is a critical period for connected fitness products revenue, as Q2 historically represents over 40% of annual hardware unit sales," the company said. "Connected fitness products revenue exceeded expectations from higher-than-expected premium-priced hardware sales, predominantly Tread and Tread+, partly offset by slightly softer overall unit sales."

The company said it also saw increased demand for its lower-priced refurbished bike.

Connected fitness subscriptions slipped 0.7% from the previous quarter to 2.88 million, but churn improved to 1.4% from 1.9%

Gross profit for the business more than doubled from the previous quarter, to $32.8 million from $14.6 million, and gross margin improved to 12.9% from 9.2%.

Meanwhile, subscription revenue of $420.6 million was 1.3% lower than the previous quarter and down 0.9% from a year ago, but was above the FactSet consensus of $415.9 million.

Looking ahead, Peloton said it expects fiscal 2025 adjusted earnings before interest, taxes, depreciation and amortization (Ebitda), a measure of underlying profitability, of $300 million to $350 million, up from previous guidance of $240 million to $290 million.

The company's target for full-year free cash flow also increased to at least $200 million from $125 million.

The stock has lost 4.4% over the past three months through Wednesday but has rocketed 73.1% over the past 12 months. In comparison, the S&P 500 index SPX has tacked on 2.2% the past three months and advanced 22.4% the past year.

-Tomi Kilgore

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February 06, 2025 08:57 ET (13:57 GMT)

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