Peleton Stock Crushed On Ugly Outlook And Accounting Issues

Summary:

Peleton stock (NASDAQ: PTON) lost 15% after-hours following disappointing fiscal fourth-quarter earnings and a warning that worse is to come.

Peleton stock (NASDAQ: PTON) lost 15% after-hours following disappointing fiscal fourth-quarter earnings and a warning that worse is to come. At first glance, the bike-makers numbers were not a complete disaster. In Q4, revenue increased to $936.9 million, compared to $607.1 in the same period last year and better than estimates of $929.10. Subscription and connected fitness revenues were also better than expected, and the adjusted Ebitda loss of $45.1m was less than the expected $57m. However, the loss per share of $1.05 was way worse than the expected $0.45, and the forward guidance, even more dismal.

It was the Nasdaq-listed company’s terrible projections for Q1 that rattled investors. Peleton lowered the Q1 projected revenue from 1.15b to $800. Furthermore, it sees an adjusted Ebitda loss of a whopping $285m. This sent Peleton stock crashing below $100 to a three month low of $97.00. However, the stock did manage to reclaim the $100 level, finishing at $107.41.

And if that wasn’t bad enough, the earnings call revealed material weakness over financial reporting regarding its inventory value. Not to mention that in the hope to revive growth, they will slash 20% from the price of their best selling model.

But of most concern is that last night, the long-term uptrend was tested. And that may be a sign of what to expect today.

PTON Price Forecast

The 60-minute chart shows the scale of the negative reaction following last night’s trading update. However, the daily chart underscores the importance of the $97.00 level. A trend line from the March 2020 low is seen at $97.00 and was likely the reason for the after-hours bounce.

Notably, the spike back above $100 failed to clear the 200-day moving average at $109.66. This should be considered the first level of resistance. And as long as PTN stays below the average, another test of $97.00 is likely. Should the Peleton stock price lose this support, May’s$480.48 low should follow.

Although the price recovered somewhat from the low last night, the downside looks favourable from here. The bearish outlook stays valid as long as PTON remains below the 200 DMA on a closing basis.