Will Peloton Stock Continue Working Out for Investors?

Peloton is pacing for a big year in revenue

facebook twitter linkedin


Peloton Interactive, Inc. (NASDAQ:PTON) is an exercise equipment company and digital fitness service provider that has turned into quite a disruptor in the fitness industry. The company sells treadmills and stationary bikes equipped with touchscreens for home workouts. Peloton also provides subscription services that grant consumers access to some of the most popular fitness instructors and the ability to participate in classes remotely through livestreams.

Peloton Interactive is also one of the biggest winners to come out of this pandemic. Peloton stock has grown over 400% since its March lows, when the shutdowns began. Yesterday, the stock rose above $100 for the first time and touched new all-time highs. The company has demonstrated such significant growth since its IPO in 2019, so the question on all investors' minds is: is there room for growth at this point? Or is the company at risk when in-person gyms and fitness studios are safely reopened and people are comfortable with returning to their pre-quarantine lives?

Peloton has released mixed earnings since its IPO in 2019. The company has beat earnings in two of the last four quarterly earnings announcements. The company beat the Street's expectations by $0.17 in the most recent quarter, and concurrently reported a positive earnings per share (EPS) of $0.27. Between the first and second quarter of this year, earnings per share for PTON increased by $0.47. In Peloton's third quarter earnings announcement this year, the company is expected to drop in EPS to $0.11.An important year-over-year comparison is, in the third quarter of last year, Peloton released its first quarterly earnings report, swinging and missing by $0.85.

Peloton has a current market cap of $29 billion and a book value of $5.51 billion. The company’s most recent quarter price/book value 15.24, with a forward price-earnings ratio of 232.56 and a twelve month trailing EPS of -$2.11. Growing company revenue consistently on both a quarterly and yearly basis, Peloton has successfully doubled its revenue annually since 2017. This year, Peloton is pacing to have its best year ever, revenue-wise. 

However, it's important to note that Peloton has been highly inconsistent with the growth of net income. The company has yet to produce a bottom-line annual profit. In 2019, Peloton reported an annual net loss of -$195.6 million, more than four times the net loss taken in 2018.

Peloton Interactive's balance sheet has $1.755 billion in cash and cash equivalents. Total assets are currently valued at $2.98 billion. Company liabilities include $508.2 million in long-term debt, signifying approximately 50% of the total liabilities currently valued at $1.30 billion. Peloton is sporting $1.68 billion in total equity on its balance sheet.

The company currently has a one-year estimate of $113.83 per share, suggesting that analysts don’t believe Peloton has much more room for growth in the short-term even though the company producing its first-ever profitable quarter with its last earnings announcement. Total net income in the second quarter of 2020 was reported at $89.1 million, with a total revenue of $607.1 million.

From main street, it’s not difficult to see why Peloton has taken off in a big way, especially this year. Peloton has had the unique opportunity to win over customers in mass, as a result of gyms and fitness studios being forced to shut down and, even upon opening, adhere to much higher sanitation standards. However, unlike low-priced gym memberships, the high price of the Peloton equipment will likely have its consumers more committed to exercising. This commitment should translate into consistent subscription revenue. Although Peloton's monthly subscription fees are on the higher end as compared to most gyms and fitness studios, the company's niche customer base is upper middle-class and upper class.

In conclusion, Peloton has been at the forefront of innovating the fitness industry and has a strong opportunity to continue to lead innovation. The biggest requirement that investors need to keep an eye on is that Peloton is able to continue to steadily engage its consumers and grow its overall distribution, especially in a post-pandemic setting.

Grab your FREE Eternal Contrarian report!


 




 
Special Offers from Schaeffer's Trading Partners