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Why Peloton Stock Fell 18% in February

By Beth McKenna - Updated Mar 1, 2021 at 8:59PM

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Despite last month's pullback, shares of the home-fitness company have sprinted ahead 364% over the last year.

What happened

Shares of Peloton Interactive (PTON -1.49%) dropped 17.6% in February, according to data from S&P Global Market Intelligence. For context, the S&P 500 returned 2.8% last month.

Despite this pullback, shares of the connected-fitness specialist, which held its initial public offering in September 2019, have gained 364% over the one-year period through March 1. The broader market has returned 34.4% over this period. 

Middle-aged man riding a Peloton bike in a bedroom.

Image source: Getty Images.

So what

We can probably attribute Peloton stock's weak performance in February to two main factors. The first one is general market dynamics, as many growth stocks with high valuations pulled back last month. The second factor is investor disappointment with the company's report for its fiscal second quarter of 2021, which ended on Dec. 31.

Shares fell 5.9% the day after the Feb. 4 earnings release and continued to move downward. The quarter's results themselves were strong, but some investors were likely concerned with management's statement that measures to improve the company's ongoing inventory and supply chain issues will hurt profits in the near term. Those measures include paying for expedited shipping.

In fiscal Q2, revenue soared 128% year over year to $1.065 billion, and earnings per share came in at $0.18, versus a loss of $0.20 per share in the year-ago period. Both results beat Wall Street's expectations, which were for EPS of $0.09 on revenue of $1.03 billion.

PTON Chart

Data by YCharts.

Now what

For the third quarter of fiscal 2021, management guided for revenue of $1.10 billion, representing growth of 110% year over year. It expects connected fitness subscriptions to grow about 123% to 1.98 million.

Management raised its outlook for full-year fiscal 2021. It now expects revenue of $4.075 billion or more (up from prior guidance of $3.9 billion), representing growth of at least 126% year over year. And it now projects that connected fitness subscriptions will grow at least 109% to 2.275 million or more. That's up from prior guidance of 2.17 million. 

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