2023 has been a good year for the Nasdaq Composite (^IXIC 0.12%) so far, with the index having recovered a significant portion of its 2022 losses. However, it still has a long way to go before it can reach all-time highs once again. Unfortunately, the Nasdaq wasn't able to hold onto early gains on Wednesday, losing about a third of a percent shortly before noon ET.
A couple of Nasdaq stocks saw particularly sharp declines Wednesday morning that stemmed from bad news in their respective businesses. American Airlines Group (AAL -0.11%) warned that its first-quarter financial results likely wouldn't be as strong as most had hoped, while stock analysts noted some negative trends for connected fitness equipment provider Peloton Interactive (PTON 3.01%) that weighed heavily on the stock.
American Airlines loses altitude
Shares of American Airlines Group were down 9% at midday. The airline posted an update on its first-quarter financial results that compared reasonably well to its previous expectations but nevertheless left investors wanting more.
American said that it flew 65 billion total available seat miles during the first quarter of 2023, up 9.2% year over year. Total revenue per available seat mile rose 25.5% from year-ago levels, and cost per available seat mile excluding fuel was lower by 1.5%, showing the impacts of American's cost-cutting efforts. As a result, it believes it earned between $0.01 and $0.05 per share on an adjusted basis, which was slightly better than the breakeven performance that the airline had expected.
All of those figures were at or above the midpoint of American's previous guidance, so the stock's drop might not seem to make sense. However, Wall Street analysts had already expected American to do better than what its previous projections had suggested. In fact, they were looking for $0.07 per share on average from the airline in the first quarter, so even what appeared to be a beat fell short of what many were hoping to see.
Airlines have been in financial straits for years due to the huge disruptions of the COVID-19 pandemic, but strong travel trends have been a contributing factor to their recovery. Nevertheless, American and other airline stocks haven't performed all that well, and today's drop heading into earnings season doesn't bode well for the industry.
Peloton sees traffic slow
Meanwhile, shares of Peloton Interactive were also weak, down 9%. After having suffered numerous challenges, it appears that the maker of interactive exercise bikes and treadmills could face another slowdown in its core business.
Analysts at Morgan Stanley said that Peloton's web traffic fell sharply during its fiscal third quarter compared to the same period last year. With promotional activity having slowed dramatically in an effort to boost margins, Peloton likely saw a 27% drop in web traffic, showing that the business wasn't able to maintain the positive momentum generated during the holiday season.
Moreover, there's a risk of even worse results ahead. If customers choose to give up their subscriptions, they'll typically do so in the months immediately after having started the service. That raises the risk of weaker business metrics, although Morgan Stanley does believe that Peloton will post about 70,000 new subscriptions for the quarter.
Peloton has struggled as pandemic-induced trends to stay at home have given way to a return to gyms and fitness centers. To recover, the fitness equipment maker will have to find a new way to appeal to consumers, but that isn't evident yet from Peloton's recent actions.
