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Why Peloton Stock Dipped on Monday

By Brett Schafer – Nov 22, 2021 at 11:55AM

Key Points

  • Peloton stock is down 6% on Monday and down over 50% in the last month.
  • The company reduced its subscriber and sales guidance for its upcoming fiscal year.
  • Management also announced a common stock offering to raise capital.

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The connected-fitness company continues to fall after a disappointing earnings report and announcing a common-stock offering.

What happened

Shares of Peloton (PTON -1.19%) took a tumble Monday morning, with the stock down as much as 6.75% on the day. There was no news associated with the price drop, so it looks like this is just continued fallout from the company's recent earnings report and capital raise. The stock is down 5.6% as of 11:13 a.m. ET. 

So what

Peloton released its first-quarter earnings on Nov. 4, covering the three months ending in September of this year. Churn was up in the quarter, from 0.73% to 0.82% (assessed on a monthly basis), and Peloton reduced its fiscal-year revenue guidance from $5.4 billion down to a range of $4.4 billion-$4.8 billion. It also reduced its guidance for connected-fitness subscriptions from 3.63 million down to a range of 3.35 million-3.45 million. Clearly, investors have not been happy with these updates, which is why the stock is down almost 50% in the last month.

A person riding a stationary bike.

Image source: Getty Images.

On top of this, Peloton announced it was doing a common stock offering, selling approximately 24 million shares at a price of $46 a share, to raise over $1 billion. The stock initially popped on the announcement, which is atypical for a common-stock offering, but has since fallen back below $46 a share. Investors usually don't like common-stock offerings, as it dilutes their ownership of the business.

Now what

Currently, Peloton stock is selling for $44 a share, which gives it a market cap of $14 billion before including the upcoming capital raise. It's down significantly from earlier this year when it had a market cap north of $40 billion.

The business looks like it's struggling to grow right now. However, if you're confident in Peloton's long-term plans to bring connected fitness to millions of people's homes, then now could be a good time to buy this fallen angel. 

Brett Schafer has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Peloton Interactive. The Motley Fool has a disclosure policy.

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