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Peloton (PTON) Stock Tries to Rebound After Commercial Backlash

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Peloton (PTON - Free Report) was down over 9% at one point in Tuesday’s trading after it faced scrutiny over its new holiday commercial.

The young exercise equipment company faces criticism over its ad that implores consumers to “give the gift of Peloton.” Raymond James analysts said in a note Tuesday that Peloton should reconsider its marketing strategy “given the frequency in which its ads are parodied on social media.”

The company is already scrutinized over its expensive exercise equipment that seems to cater to affluent consumers, and with the latest debacle, some investors may seriously wonder just how marketable Peloton is.

Holiday Advertising Backfires

Viewers were critical about multiple aspects of the holiday commercial, which spurred parodies on social media sites like Twitter (TWTR - Free Report) . Some were critical of how the husband’s Peloton gift to his wife inferred that he thinks she should lose weight.

The company’s new commercial has garnered over 2.7 million views on its YouTube (GOOGL - Free Report) channel. Peloton has since disabled its comments in an effort to quell the criticism. According to iSpot.tv, the ad first ran on Nov. 4 and has run more than 6,800 times, which accounts for an estimated $13.5 million in TV spending. The ad has 15 and 30-second versions, which run on Disney (DIS - Free Report) owned ESPN as well as NBC and Fox.

A Peloton spokesperson responded to the scrutiny an email sent to CNBC that said “While we’re disappointed in how some have misinterpreted this commercial; we are encouraged by — and grateful for — the outpouring of support we’ve received from those who understand what we were trying to communicate.”

Holiday Season Outlook

Does the negative publicity from the commercial effectively doom Peloton sales this holiday season? Peloton has historically generated more revenue during the holiday quarter than in the two previous quarters combined. The historical boost in business during the holiday season naturally motivated Peloton to increase its marketing.

While there are certain consumers out there who may scrutinize Peloton products, there are also many users who highly recommend the service and product.

Peloton products have resonated with its target audience as the company saw its net revenue more than double last quarter and the company now boasts over 560,000 subscribers on its fitness service. The number of monthly workouts per user has also increased from 8.9 to 11.7 sessions over the past year.

Our Q2 estimates forecast for sales to reach $417.09 million and for earnings to come in at a loss of $0.32 per share. Looking ahead to fiscal 2020, estimates project sales to reach $1.49 billion for a 62.5% hike and for earnings to come in at a loss of $1.16 per share.

Our fiscal 2021 estimates forecast sales to increase 46.4% to $2.18 billion. Meanwhile, the company’s adjusted loss is projected to come in lower at a loss of $0.95 per share.

This hasn’t been an easy year 2019’s IPO class, as Uber (UBER - Free Report) , Lyft (LYFT - Free Report) , and Slack (WORK - Free Report) have all struggled to gain any traction. However, Peloton has put together a nice comeback as it is up over 38% since reporting its first quarter performance as a publicly traded company.

Takeaway

Peloton’s commercial may have rubbed some viewers the wrong way but this uproar has brought more attention to the young company. The company continues to be a hit with its targeted consumer base, which has driven its top-line performance. While Wall Street wants the company to be able to market to a broader audience, Peloton seems to be getting by with the appeal it does have.

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