Peloton (PTON) stock was tanking in pre-market trade on Wednesday, falling as much as 28% after the connected fitness bike maker said it saw a slowdown in subscriber growth and the cost of its seat recall “substantially exceeded” its expectations.
“Growth also was slowed by the seat post recall we announced on May 11th in so far as first party and third party sales of our original Peloton Bike were supply constrained by seat post availability,” the company said in a shareholder letter on Wednesday.
“The cost of this recall substantially exceeded our initial expectations leading to an additional accrual of $40 million this quarter for actual costs incurred as well as anticipated future recall-related expenses.”
Members also paused their monthly subscriptions during the quarter, pending the receipt of a replacement seat post. Peloton’s subscribers declined by 29,000 from the previous quarter, though on a year-over-year basis subscriptions grew 4%.
The company’s fiscal fourth quarter revenue of $642.1 million fell 5.4% from the same period last year, but came in above Wall Street forecasts for $641.6 million.
Its first quarter revenue forecast of $580 million-$600 million, however, came in below consensus analyst expectations $647.8 million.
Shares were set to open just below $5 each, a far cry from its all-time highs of more than $160 in December of 2020. Year to date the stock is down 11%. The stock has11 analyst Buy recommendations, fifteen Hold and four Sell ratings.
Peloton also noted for that for the second time it achieved positive free cash flow in the most recent quarter. However, the company doesn’t expect to remain free cash flow positive in the two upcoming quarters; Peloton anticipates achieving this metric again in the second half of its fiscal 2024.
Peloton has been struggling to turn itself around after the once-high flying stock started tumbling during the pandemic amid supply chain issues and safety incidents that led to recalls. The post pandemic re-openings also waned on results with rising interest rates punishing fast growers like Peloton as well.
Last year the company tapped veteran tech exec Barry McCarthy to lead the struggling equipment maker.
“If you’ve been wondering whether or not Peloton can make an epic comeback, this quarter’s results show the changes we’re making are working,” McCarthy told investors in February.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre.
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