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Why Peloton Interactive Stock Dropped Today

By Howard Smith - Updated Feb 5, 2021 at 12:00PM

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Quarterly revenue grew to over $1 billion for the first time, but the company revealed some business challenges.

What happened

Shares of Peloton Interactive (PTON 6.51%) were down 8.5% on Friday morning, as of 11:40 a.m. EST. Though quarterly earnings showed strong growth, the company detailed some logistical issues and product shipping delays. 

So what

The stock today seems to be reacting to the consequences related to how the company plans to address delivery delays. Peloton will be "incrementally investing over $100 million in air freight and expedited ocean freight over the next six months in order to improve our order-to-delivery windows," the company said in a statement. It will also delay the launch of its new treadmill product in the U.S. 

woman on Peloton indoor bike

Image source: Peloton Interactive.

Now what

The product delivery delays come even as Peloton said it has "significantly increased Bike and Bike+ production over the last several months." The company said in its earnings call it will focus on addressing its delivery issues, and delay the launch of its new treadmill by approximately two months in the U.S. 

Investors should consider these logistics issues a good problem to have. They exist because of the popularity of the company's offerings. Revenue grew 128% in the quarter, compared to the prior-year period. Subscription revenue grew 152%.

While the added costs will impact margins until the supply chain issues are resolved, strong product growth is a good sign for the company's long-term prospects. Investing in a growth company sometimes comes with growing pains, and it's likely that Peloton will resolve those over time. 

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