Nautilus Inc., just days removed from a precipitous plunge in its stock price, appeared to have found level ground Tuesday.
The Vancouver-based exercise equipment brand ended the day on the New York Stock Exchange at $6.86 per share.
While that was nearly 42 percent lower than its $11.79 closing price Thursday, it was just two-tenths of a percentage point below its opening price of $7.07 Tuesday morning, the week’s first day of trading after markets were closed in observance of Martin Luther King Jr. Day.
One stock analyst believes the company’s early warning could presage a challenging year for Nautilus. And a competitor called Peloton threatens the Nautilus bottom line.
The stock price drop-off followed Nautilus’ pre-released fourth quarter and full-year results on Thursday that warned investors that earnings would fall below the company’s previous predictions made in October.
Instead of annual revenue of $431 million to $440 million, profit of $42 million to $45 million, and earnings per share of $1.01, the company said to expect $395 million to $397 million in revenue; $20 million to $21 million in profit and 40 cents to 50 cents per share profit. Audited results are expected in late February.
The company said sales of $114 million to $116 million are expected for the fourth quarter of 2018. In 2017, the company reported fourth-quarter sales of $127.8 million.
In its release Thursday, the Nautilus statement said it “expected significantly stronger sales” in direct sales to consumers, “driven by the introduction of the new digital platform Max Intelligence. We expect that as consumers are further exposed to (Max Intelligence), this unique product will help to accelerate sales across a number of our products and brands in the future starting in 2019.”
Introduced in November in time for the holidays and New Year’s resolutions, the Max platform is an app that costs $14.95 a month or $149 per year. It works in tandem with the Bowflex Max Trainer M6 and M8 cardio machines, offering personalized — yet computer generated — coaching tips based on past performance on the machine as well as other factors. The Max Trainer M6 costs about $1,699; the M8, $2,299.
In response to the company’s announcement Thursday, asset manager D.A. Davidson & Co. lowered its rating from buy to neutral for Nautilus.
“We fear the initial 2019 guide that will be announced on the call in late February will most likely reflect a continuation of several of these trends,” says the research note Davidson analyst Michael Kawamoto issued last week.
“We are encouraged to hear that responses from people who have used the Max Intelligence platform have been positive overall,” Kawamoto wrote, “but the company’s marketing efforts have not been resonating with consumers like Nautilus had expected.”
Breaking from the pack
In its annual report for 2017, Nautilus mentioned six principal competitors. But only one of those six set the exercise equipment world on its ear in 2018.
Peloton, the privately held company based in New York, broke from the pack in 2018.
The company announced in August a $550 million round of funding, for a total of $1 billion raised with a $4 billion valuation. Peloton has captured an audience with this lure: A consumer buys one of the company’s $1,995 bikes then pays $39 a month for live video spin classes.
Also last year, the company began selling a treadmill called Peloton Tread for $3,995.
Peloton is on track to bring in $700 million in revenue for the fiscal year ending in February, Jessica Kleiman, vice president of global communications for Peloton, told The New York Times. It plans to go public this year.
While Kawamoto says in his investor note that it’s unclear why Nautilus’ Max Intelligence did not immediately catch on with consumers, Peloton may play a role.
Nautilus “has a tough road ahead while they figure out a messaging strategy that can cut through the noise from Peloton,” Kawamoto wrote in an email Tuesday, “as well as fears from a slowing economy (housing data has been tough).”
