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People walk past a Peloton store in Coral Gables, Florida.
Joe Raedle/Getty Images
Shares of
Peloton Interactive
have had a difficult year, and they’re not getting any help Tuesday from a sales warning from a smaller competitor.
The weak revenue outlook from
Nautilus
drives home the point that the future of the at-home fitness segment remains murky, according to Craig-Hallum analyst Steve Dyer.
Shares of Peloton (ticker: PTON) soared during the pandemic, with consumers not frequenting the gym due to pandemic-related shutdowns. Now with the reopening of the economy, fewer consumers have relied on Peloton’s at-home exercise model. The stock has dropped about 93% from its all-time closing high of $167.42 in January 2021 and has fallen 64% this year, according to Dow Jones Market Data.
Consumer fitness products company (NLS) said Monday that it expects first-quarter sales of $45 million to $55 million, well off analysts’ forecasts. Dyer called the guidance “weak” and added that “the ‘new normal’ of home fitness demand is anyone’s guess.” Dyer lowered his rating on Nautilus to Hold from Buy and lowered his price target of the stock to $2 from $9. Nautilus was falling 19.3% on Tuesday to $2.02.
“The at-home fitness industry is now in a normalization mode following mania in2020/2021. Demand is softening, cost inflation increasing, and competitive headwinds intensifying,” Dyer added. “All said, we think business fundamentals will be challenged in the near term.”
Shares of Peloton have fallen for three consecutive days. They were down 5.3% on Tuesday.
Peloton reported third-quarter earnings and fourth-quarter guidance earlier this month that missed analysts’ estimates. It also announced it was borrowing $750 million in five-year debt from JPMorgan Chase and Goldman Sachs to strengthen its balance sheet.
Peloton also estimated that gross margin for the fourth quarter should be about 31%.
At J.P. Morgan’s Global Technology, Media and Communications Conference on Tuesday, when asked if the company can return to 50% gross margins, Peloton Chief Executive Officer Barry McCarthy said, “I don’t care about Connected Fitness or gross margins.” McCarthy said he cares about “lifetime value, how much we spend in marketing to acquire a sub and how much that sub is going to generate for us in profit over their lifetime,” according to The Fly.
Write to Angela Palumbo at [email protected]