Peloton share prices plummet as spin bike brand unveils losses of $49.8 million

Interactive training company Peloton has lost $49.8 million in the first fiscal quarter of 2020, with share prices plummeting by 7.6 per cent on Tuesday following release of its financial report.

Investors are concerned over the larger than anticipated losses; the company was expected to generate $199 million in revenue, and lose $1.20 per share. Instead, it's delivered $228 million but a loss of $1.29 per share.

>>> Peloton indoor training bike review

The spin bike and connected app brand has doubled its user base from 277,000 a year ago to 560,000 at the end of this quarter.

The brand anticipates a total revenue of $1.45 to $1.5 billion over the full year, but its stock prices are now trading at $24, below the $29 share price from its Initial Public Offering (IPO) in October this year.

Operating costs at the company are said to have risen by 46 per cent, to $156 million, with much of the cash going into increased marketing spend as Peloton aims to send its brand of hip-hop-happy indoor cycling workouts global.

Speaking to Reuters (opens in new tab), Chief Executive John Foley said: “We are within striking distance of profitability.

"I believe if we pulled back on growth we could be profitable tomorrow but that is not what the board and the leadership of Peloton believes we should do.”

As well as launching new products, the brand is planning to open Peloton Germany later this month.

“We think this opportunity globally is so big that we think we’re right on the right balance of investing for future growth,” Foley said.

The creators of the interactive coach led spin classes also spent $47.4 million on acquiring one of its two main bike manufacturing partners, Tonic Fitness Technology, Inc.

Peloton has worked with Tonic Fitness since 2013, and the acquisition was designed to help reduce the risk of being dependent on a third party supplier.

In September this year, it was revealed that the brand was facing damages bills of up to $300 million following the accusation that it has used music without proper licensing.

In October, it was reported by the Los Angeles Times  (opens in new tab)that Peloton was filing a lawsuit against Echelon Fitness, alleging that the competitor was aiming to undercut its business with "cheap, copycat products."

Peloton operates on a subscription basis - customers pay to use the connected app and follow instructor led workouts at home. To get the full interactive experience, they can purchase the Peloton exercise bike from £1,990.

The machine has variable resistance, and does not measure watts but estimates power based on the resistance level and cadence, with users able to see themselves ranked against other riders around the world during sessions.