Recently, these three stay-at-home stocks have prospered due to the pandemic, but if a vaccine is found and normality restored, can they still thrive?
Aug. 27, 2020
These three companies are some of the most well-known brands in the U.S, and with market caps at around $20 billion, there is still plenty of room to grow.
Peloton (NASDAQ: PTON) operates an interactive fitness platform in a $600 billion industry and has more than 2.6 million members worldwide. Peloton’s stock has gained nearly 125% as of the 25th of August with people opting for home workouts rather than going to the gym.
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At first glance, Peloton’s $2,000 exercise product appears expensive, but with a standard subscription and the equipment paid for in instalments, it works out at a few dollars per workout. It also generates recurring revenue from subscriptions accounting for $98.2 million in Q3 and growing 92% year-over-year, which is just under one-fifth of total revenue.
Peloton posted some impressive results in Q3 of 2020, with paid digital subscribers growing by 64% to 176,000. Revenue increased by 66% to $524.6 million driven by bike sales. Peloton had a net loss of $55.6 million but still has a strong balance sheet with $1.4 billion in cash and cash equivalents. Peloton also raised guidance in the last quarter and is expecting 128% revenue growth at the midpoint in Q4.
Pinterest (NYSE: PINS) is a unique social media platform allowing users to search for particular topics and create “boards” or “pin” pictures and videos.
The number of users on the platform has grown substantially by 39% from the year prior to 416 million, driven by 106 million new international users over the last 12 months. This growth is expected to slow although it is likely many of these new users will remain on the platform which will drive ad revenue growth as Pinterest monetizes these users. The average revenue per user increased 21% internationally but declined in the U.S by 11%.
Revenue for Q2 of 2020 grew by 4% to $272 million despite headwinds due to COVID-19 and less advertising spend. Ad spend on the platform picked up in the last months of the quarter. Consistent revenue growth over the coming years will be critical to its success.
Pinterest can also benefit from the growth in e-commerce, with 80% of weekly pinners purchasing based on a pin they liked. Pinterest has partnered with Shopify (NYSE: SHOP) to bring merchants to the site, which should increase ad spend on the platform.
Take-Two Interactive (NASDAQ: TTWO) is an American video game holding company which has Rockstar Games who have produced titles such as “Grand Theft Auto” and “Red Dead Redemption”.
Take-Two’s hit titles have seen a surge in users over the last quarter along with record increases in recurring revenue. Daily active users for “NBA 2K” grew 82% and reached $1 billion in net bookings (net sales) since the launch, and recurring revenue grew 126% for the quarter. “GTA V” also saw a record Q1 since its launch in 2013 selling a record number of units and continues to engage users through its online segment. The online side of the business adds longevity to titles and generates significant revenue growth.
In Q1 2021, net revenue increased 54% to $831.3 million, which is a record Q1 and management raised guidance for the year. Net bookings grew 136% which is another record for Q1 driven by “NBA 2K20”, “GTA V” and “Red Dead Redemption”. Recurrent consumer spending also grew 127%, which is contributing to a more consistent revenue stream.
Business is booming at Take-Two, and this looks set to continue with more hit titles such as “GTA VI” on the horizon, while the gaming industry overall is headed for a worth of $300 billion by 2025.
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