Peloton's [PTON] share price has seen triple digit gains this year as lockdown led to outsized demand for high-tech exercise bikes and treadmills. Since hitting an all-time high of $137.24 on 15 October, though, Peloton's share price has fallen over 18.13% (as of 3 November’s close). The steep descent comes despite several bullish analyst calls and the prospect of countries across the globe going into a second lockdown.
Can Peloton's share price shift up a gear after this week's earnings results, or has the stock run out of mileage?
When will Peloton report earnings?
What to look out for
Peloton's share price benefitted from its previous quarter, which was one to remember. Earnings came in at $0.27 a share, well ahead of the $2.07 loss per share seen in the same period last year. Sales were also huge at $607.1m, up from $223.3m last year and easily topping analyst expectations. Peloton ended the quarter with 1.09 million connected fitness subscribers, a 113% jump from the previous year and around 3.1 million members in total.
Can the white-hot pace continue? Peloton's share price is likely to move following the upcoming results, which will cover a period when lockdown measures were easing across the globe. This is bound to affect earnings, but the extent of the impact is uncertain.
Peloton itself is predicting that fiscal first-quarter sales will come in somewhere between $720m and $730m — well ahead of the $196.86m in sales seen in the same period last year. Adjusted EBITDA is predicted to come in at $80m to $90m, with a gross profit margin of 41%. Connected fitness subscribers is forecast at 1.32 million to 1.33 million, a 135% increase at the midpoint.
Wall Street is predicting Peloton will post earnings of $0.11 a share, up from the $1.29 loss per share seen last year. Revenue is forecast at $747.95m, a whopping 279.90% increase from last year.
Peloton's 1Q21 forecast revenue increase
For the full year, Peloton is predicting revenue of between $3.5bn and $3.65bn — any revision to this estimate is likely to move the share price. Wall Street has revenue pegged at $3.63bn forecast, which would represent a 98.8% increase on this time last year.
Shipping problems to weigh on future earnings
One thing to keep an eye out for is shipping problems. More demand has led to major delays in customers getting their hands on the bikes, with some orders taking between six and ten weeks longer than anticipated. This is a problem Peloton acknowledged in second quarter earnings.
Goldman Sachs has downgraded Peloton's stock to Neutral, citing shipping delays caused by high demand and congestion at Los Angeles ports. Goldman Sachs said the delays could weigh on earnings for the rest of 2020 and into the New Year. Should this affect fourth quarter guidance, Peloton's share price could see post-earnings volatility.
"These issues highlight the degree to which Peloton's fulfilment operation has been pushed due to the continuously high levels of demand the company has seen since the beginning of the pandemic," said analysts at Goldman Sachs.
"These issues highlight the degree to which Peloton's fulfilment operation has been pushed due to the continuously high levels of demand the company has seen since the beginning of the pandemic," - Goldman Sachs analysts
What are the analysts saying about Peloton's share price?
Despite the delivery headaches, Goldman Sachs upped its price target on Peloton from $138 to $140, representing a 25% upside on 3 November’s closing price.
Other bulls include KeyBanc Capital Markets analyst Edward Yruma with a $160 price target. Yruma believes that gym closures and the second wave of the coronavirus “further reinforces the inherent convenience of at-home connected fitness devices like Peloton.”
Analysts over at Needham are similarly bullish on Peloton, raising their price target to $125 on Monday. Needham believe a combination of more customers and lower churn of existing ones will see Peloton’s share price benefit from increased profits over the next couple of years.
Barron's points out that Wall Street has failed to keep up with Peloton's share price gains. The average target price on Yahoo Finance is $121.71, just 8.96% higher than Peloton's share price through 3 November’s close.
It is worth remembering that, out of 26 analysts, 21 have either Strong Buy or Buy ratings.
|Operating margin (TTM)||1.12%|
|Quarterly revenue growth (YoY)||171.80%|
Peloton's share price vitals, Yahoo Finance, 4 November 2020