Peloton shares surge after raising profit outlook

Investing.com-- Peloton Interactive (NASDAQ:PTON) shares surged over 25% on Thursday after the fitness equipment maker reported better-than-expected revenue for its second quarter and raised its full-year profit guidance, despite missing earnings estimates.

The company reported revenue of $673.9 million for the quarter, surpassing the analyst consensus of $651.77 million. However, Peloton's adjusted earnings per share came in at -$0.24, falling short of the -$0.20 estimate. Compared to the same quarter last year, revenue declined by 6.2%.

Peloton raised its full-year adjusted EBITDA guidance range to $300-$350 million from the previous $240-$290 million. The company also increased its free cash flow target to at least $200 million, up from $125 million previously.

CEO Barry McCarthy commented on the company's outlook, stating, "We see significant opportunities ahead, but we have a steep hill to climb to reach sustained, profitable growth."

For the third quarter, Peloton forecasts revenue between $605-$625 million, below the analyst consensus of $652.5 million. The company's full-year revenue guidance of $2.43-$2.48 billion aligns with the analyst estimate of $2.47 billion.

"PTON reported a top- and bottom-line beat, besting consensus for CF Product and subscription revenues, and again raising adjusted EBITDA and FCF guidance, which we still believe is conservative," according to BMO. 

J P Morgan also expressed its optimism about Peloton’s second-quarter upside and ongoing profitability improvements, driven by lower operating expenses, expanding adjusted EBITDA margins, rising free cash flow, and further balance sheet deleveraging. However, it continues to watch for a return to subscriber growth, which Peloton does not expect in the second half of fiscal 2025. 

"We expect shares to respond favorably to PTON’s FY25 Adj. EBITDA&FCF guidance raise,&we look for more color on return to growth under new CEO Peter Stern (AS:PBHP)," analysts said in a note expressing their initial view.

Peloton reported improvements in customer satisfaction, with Net Promoter Scores for its core products exceeding 70. The company also noted a 25% year-over-year reduction in operating expenses and generated over $100 million in both GAAP net cash from operating activities and non-GAAP free cash flow.

The fitness company's balance sheet showed signs of improvement, with total debt decreasing by $190.1 million year-over-year and net debt dropping by $281.4 million, or 30%, compared to the same period last year.