Peloton stock is a ‘buy’ despite over $1.0 billion loss in Q4: Cramer

Peloton Interactive Inc (NASDAQ: PTON) is down 20% on Thursday after the fitness equipment company disappointed investors not just in terms of its Q4 results but the future guidance as well.

Should you buy Peloton stock?

Peloton stock has failed to find a floor since the start of 2021. It’s still averaging at about $650 million of negative free cash flow a quarter.

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Still, Jim Cramer has enough confidence in the new management to recommend buying it. This morning on CNBC’s “Squawk on the Street”, he said:

I say, you buy McCarthy. He’s talking about London offensive, going international. Liz Coddington – a fantastic person in finance will now be the CFO. The sloppy nature of previous reporting is over, the expense they had in the last mile is over, they needed cuts as painful as they were. They say our goal is fiscal 23; we just had fiscal 2022 over.

Peloton Q4 financial highlights

• Lost $1.24 billion versus the year-ago figure of $313 million
• Per-share loss climbed sharply from $1.05 to $3.68
• Revenue declined 28% year-over-year to $679 million
• Consensus was 76 cents of per-share loss on $682 million revenue
• Average monthly churn of 1.4% was bigger than 1.04% expected

CEO McCarthy’s remarks

The quarterly loss was partially a function of $415 million hit from restructuring. In the letter to shareholders, CEO Barry McCarthy said:

The loss reflects the substantial progress we made this last quarter re-architecting the business to reduce the current and future inventory overhang, converting fixed to variable costs, and addressing numerous supply chain issue.

The Nasdaq-listed firm ended the quarter with 2.97 million connected fitness subscribers, roughly in line with Street estimates. Revenue from subscriptions was $383 million in Q4.

Peloton stock down on future guidance

Peloton stock is also down since the connected fitness company lowered its guidance, citing seasonally weaker demand. The recent price hike could weigh on sales as well.

For the current financial quarter, Peloton expects its revenue to fall between $625 million and $650 million – a 21% YoY decline.

A day earlier, the New York based company said it will start selling its fitness equipment and apparel on Amazon.