Connected fitness equipment maker Peloton Interactive (NASDAQ:PTON) is scheduled to announce its earnings for the second quarter of Fiscal 2023 before the market opens on February 1, Wednesday. Analysts expect the company to report a loss due to continued decline in revenue amid a weak demand backdrop.
Analysts’ Q2 Estimates Reflect Persistent Weakness
Peloton gained from massive demand for its products during the pandemic-led lockdowns. However, demand waned following the reopening of the economy and the company suffered huge losses because it accumulated significant inventory in anticipation of robust sales.
Peloton’s Q1 FY23 (ended September 30, 2022) revenue declined 23% year-over-year to $616.5 million. Meanwhile, the company’s net loss per share narrowed to $1.20 from $1.25 in the prior-year quarter but was worse than analysts’ expectation of a loss per share of $0.67.
While the company reported negative free cash flow of $246.3 million in Q1 FY23, it marked an improvement from negative free cash flow of $651.9 million in Q1 FY22. The company assured investors that it is targeting break-even or near break-even free cash flow in the second half of FY23.
Peloton is trying to revive its business by bringing down costs and increasing the distribution of its products. It has entered into strategic partnerships with Amazon (AMZN) and Dick’s Sporting Goods (DKS) to boost the distribution of its bikes and other offerings. The company has also collaborated with hospitality giant Hilton (HLT) to place its bikes in all 5,400 Hilton-branded hotels in the U.S.
Coming to Q2 FY23 expectations, analysts expect Peloton to report a loss per share of $0.66 compared to a net loss per share of $1.39 in the prior-year quarter. Revenue is expected to decline over 37% to $710.2 million, reflecting further deterioration in the top-line.
What is the Price Target for Peloton Stock?
PTON shares have rallied nearly 54% so far in 2023 due to improved sentiment for growth stocks. The average PTON stock price target of $12.23 implies a possible downside of 2.2% from current levels. Wall Street is cautiously optimistic about Peloton, with a Moderate Buy consensus rating based on eight Buys, 11 Holds, and one Sell.
Conclusion
Analysts expect continued weakness in Peloton’s revenue in Q2 FY23 as consumer spending on discretionary goods has been impacted by inflation. Moreover, the demand for the company’s products has declined in recent quarters as people went back to gyms following the reopening of the economy.
The company’s Q2 results and management’s outlook will give investors clarity about the impact of the company’s turnaround initiatives and cost reduction efforts.
