Peloton drops 7% after the cycle-maker said it's struggling to keep up with surging demand for its flagship fitness products

Shalini Nagarajan

Feb 5, 2021, 20:59 IST

Peloton

Peloton's shares dropped 7% at the market open on Friday after the release of its second-quarter earnings.
The cycle-maker said it would invest $100 million to accelerate the speed of product deliveries worldwide.
Wedbush maintained its outperform rating on Peloton as analysts expect the at-home fitness trend to last.

Peloton fell 7% on Friday after the company said it continued to struggle with delivering its bike and treadmill products on time.

The company reported its first ever billion-dollar quarter on Thursday, helped by a boom in demand for fitness products during the holiday season. But over the past year, Peloton's customers have complained of months-long waits, delivery delays, and last-minute cancellations.

Manufacturing lags were not the only challenge for deliveries. Shortages of containers, extended port delays, and a backlog to get containers unloaded were other problems the company faced, finance chief Jill Woodworth told the Financial Times.

Pandemic-related factors continue to hurt the business. So, Peloton has now invested $100 million to accelerate the pace of air and ocean freight to boost its "longer than acceptable wait times" over the next six months.

"While this investment will dampen our near-term profitability, improving our member experience is our first priority," Peloton said.

The company now expects full-year revenue to exceed $4 billion, up from a prior outlook of over $3.9 billion. Wedbush raised its 12-month price target on Peloton to $162 from $160, maintaining an "outperform" rating.

That's because analysts say the company is unfazed by the momentum of COVID-19 activity because there is a favorable shift away from traditional gyms and toward at-home fitness.

Peloton's stock closed at $157.53 on Thursday, but was lower, around $146 during regular trading on Friday.