Peloton Crushes Earnings

Peloton continues to earn big during the pandemic by bringing the gym to you, with its hardware and software business model paying out in a big way

Sept. 11, 2020

Peloton (NASDAQ: PTON) is best-known for its exercise bikes with a built-in screen to participate in classes and online workouts. Indeed, the company seems to have found its niche as a pandemic stock which thrives as a stay-at-home service. 

So, looking at its last couple of months, can Peloton continue to sustain its growth?

Peloton rides the COVID wave

Back in May, Peloton’s fiscal Q3 report recorded a huge rise in the number of subscribers signing up for its services. Within a 6 week period, 1.1 million people had downloaded the Peloton Digital app, whilst the premium fitness equipment company struggled to carry out the increasing amount of orders for their bikes and treadmills. With sales up 66% in May, coronavirus was the best thing that could have happened to Peloton. 

Many analysts over the past few months have kept a close eye on this stock, and when JPMorgan recently declared the company to be one of its top picks, Peloton’s stock price jumped 8.8% overnight. With many gyms remaining closed, or with a limited service, it is not surprising that the most recent earnings report has shown Peloton as a clear winner in this pandemic. 

Peloton operates in a new-ish market that is perfect for high revenue subscription models, although a few competitors such as Nike are already established, the market definitely has room for growth. No wonder the likes of Lululemon might be trying to carve some of its own market share by acquiring Mirror, which offers a similar service but focuses on pilates and yoga — all with the aid of a mirror of course.

Latest earnings

Peloton was expected to crush earnings and they certainly did just that. Six months into a pandemic with the rising trend of stay-at-home fitness and the fad seems like it is here to stay. The company’s revenue came in at $607.1 million, with an increase in 172% year-over-year and 15% from Q3. Expectations for revenue was only $573 million. 

Expectations for its earnings per share (EPS) was $0.10 whilst it actually came in at $0.27 per share. As for its connected subscribers, a surge over the last quarter has seen the numbers grow from 886,000 to just under 1.1 million, a 23% increase from May and a 113% increase year-over-year. Having smashed beyond its own and analysts estimates, Peloton is still riding that COVID wave.

For a company that has only been public for a year, its stock has managed to grow over 200% as of September 11. Investors should keep an eye on this stock as a potential addition to their portfolio before it gets too pricey. 

What next?

Peloton also announced the release of a fancy new product, the Bike+. The Bike+ will have several new features including Apple Watch pairing, a four-speaker sound system, and most importantly a 23-inch rotating screen which will allow users to carry out floor-based workouts (watch out Lululemon).

The cost of this new bike will be a whopping $2,495, which is the same price as its new treadmill, the ‘cleverly named’ Tread. With these two new products, the price of the original bike will be reduced to a slightly less eye-watering price of $1,895. Whilst this may still seem pricey, Peloton fills a niche, bringing a $100 billion boutique fitness industry into the home. 

Whilst Peloton makes a name for itself, it has some other companies sniffing around into this market. Notably, Lululemon, Nike, and Apple. Whilst the announcement of Apple’s plans to create an online fitness class service might have given Pelotons stock a wobble back in August, it came back fighting the very next day with a 2.1% rise. 

In light of the most recent earnings and the deployment of two new products, Peloton is looking like a well-oiled machine ready to climb that virtual mountain of success.

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