Peloton shares slump as third-quarter revenue forecast misses estimates

Investing.com -- Peloton Interactive (NASDAQ:PTON) has reported better-than-anticipated fiscal second quarter sales of $743.6 million, although investors warily eyed a weak outlook for revenue and free cash flow.

The connected exercise bike maker unveiled a third-quarter revenue forecast of $700 million to $725 million, missing Bloomberg consensus estimates of $755.6 million.

Free cash flow, a measure of incoming cash less capital expenditures and other costs that Peloton says offers a more complete picture of liquidity, is also now expected to "fall short" of the group's goal of turning positive over the full year. In a letter to shareholders, Chief Executive Barry McCarthy called achieving positive free cash flow one of his primary objectives, adding that he has been working to stop the "bleeding" at the company. 

Once a pandemic-era favorite with shut-in customers, Peloton has been attempting to reverse a post-COVID downturn in demand for its pricey fitness equipment.

Shares in Peloton moved sharply lower in early U.S. trading on Thursday.

McCarthy called the three months ended on Dec. 31 the "most important quarter of the year" for Peloton, which has been battling to boost subscriber growth as part of a wider push to re-focus the business on software instead of hardware. 

The number of paid digital subscribers using the Peloton App fell to 718,000 during the period. However, this figure still beat expectations, with McCarthy noting that there was a lower than anticipated churn in average monthly subscriptions.