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Peloton (PTON) Shares Fall 11% as Morgan Stanley Points to Diminishing Web Traffic

UTC by Ibukun Ogundare · 3 min read
Peloton (PTON) Shares Fall 11% as Morgan Stanley Points to Diminishing Web Traffic
Photo: Peloton / Facebook

Peloton is one of the few companies that massively benefitted from the unprecedented global health crisis that forced many to stay home.

Peloton Interactive (NASDAQ: PTON) saw its shares decline as investment banking company Morgan Stanley (NYSE: MS) highlighted reduced traffic on the exercise equipment maker’s website. Morgan Stanley analyst Lauren Schenk wrote in a research note that web traffic for Peloton dropped about 27% YoY in its fiscal Q3. Regarding the web traffic news, Peloton closed down at 11.23% to $10.20. The company has continued to fall in an extended trading session, losing 0.20%to $10.18. Data shows that PTON has shed more than 57% since the past year and 8.11% in the last three months. Also, the American exercise equipment company has dropped 10.60% in the last five days, losing over 4% over the past month.

Peloton Experiences Steep Decline in Web Traffic

According to the analyst, the recent quarterly web traffic decline is the highest since Peloton opened a subscription. Notably, it made sales in subscriptions in Q2 FY2023. The company said it “significantly outperformed” its expectation in subscriptions revenue and total revenue. She attributed the loss largely to lower promotional spending than the previous fiscal quarter. However, the American company recorded more turnover among customers following the launch of the Peloton subscription. Schenk stated:

“The company struggled to maintain the momentum observed during the heavily promotional holiday season. Although web traffic is still above pre-COVID levels, the 2 y/y trends have continued to deteriorate, failing to find the stability needed for a return to growth, in our view.”

The equity analysts added that the situation had put Peloton in a problematic situation as it has to choose either lower revenue or reduced earnings. Meanwhile, investors’ eyes are fixed on the two figures. On a better note, Schenk believes that Peloton will squash its added net subscribers despite the lower web traffic. The Morgan Stanley analysts said the company would overcome its prior guidance of 47,000 to 57,000 net subscribers added in the fiscal Q3.

Peloton is one of the few companies that massively benefitted from the unprecedented global health crisis that forced many to stay home. During the pandemic, consumers exercised more at home and purchased the company’s bikes and workout apps more. However, the management at Peloton did not envisage weak web traffic or lower sales, believing the pandemic rush would become a norm. Hence. They bought too much inventory, which they now sell at a loss. Peloton heavily relies on its subscription businesses, and the diminishing web traffic will affect the company significantly.

The investment banking company maintained Peloton Interactive at Equal-weight and a price target of $4.50.

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