Why Peloton Stock Soared 34% in May

Shares of the interactive fitness company continued their coronavirus pandemic-fueled sprint last month.

This article originally appears on The Motley Fool, written by Beth McKenna

Peloton Interactive (NASDAQ:PTON) stock soared 33.9% in May, according to data from S&P Global Market Intelligence. For context, the S&P 500 returned 4.8% last month.

Shares of the connected-fitness specialist have started June off on a strong note, rising 8.8% last week compared with the broader market’s 5% return.

In 2020, shares of Peloton — which held its initial public offering (IPO) in September 2019 — have gained a whopping 61.6% through Friday, June 5. The market is flat over this period. 

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So what

We can attribute Peloton stock’s strong performance last month to a continuation of its momentum from April and to the company’s May 6 release of fiscal third-quarter 2020 results that beat Wall Street’s expectations.

Shares were up nearly 21% in early May before the company released its quarterly results, as investors drove up the stock on optimism about the results. Then shares popped 16% on the day after the release.  

As I wrote last month:

In Q3, Peloton’s revenue surged 66% year over year to $524.6 million. Growth was driven by a 61% rise in connected-fitness product revenue to $420.2 million, and a 92% increase in subscription revenue to $98.2 million. Connected-fitness subscribers soared 94% to more than 886,100 and paid digital subscribers jumped 64% to over 176,600.

On the bottom line, the company recorded a net loss of $55.6 million, or $0.20 per share, compared to a net loss of $38.6 million in the year-ago period. That result was much better than the loss per share of $0.35 that Wall Street had expected. The widening net loss was primarily driven by non-recurring legal expenses. 

Moving out further than one month, the following chart shows how Peloton stock has performed so far in 2020. Shares have been getting a big boost from the shelter-in-place orders stemming from the COVID-19 pandemic. 


Now what?

Peloton management increased full-year fiscal 2020 guidance. The company is now expected to end the year with 1.04 million to 1.05 million connected-fitness subscribers, representing growth of about 104% year over year. Revenue is expected to land between $1.72 billion and $1.74 billion, representing year-over-year growth of 89% at the midpoint. 

In its fiscal Q3 shareholder letter, the company said that it “entered Q4 with a backlog of Bike deliveries in all geographies and sales continue to surpass expectations in the first several weeks of Q4 due to COVID-19.”  

MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.

Beth McKenna has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Peloton Interactive. The Motley Fool has a disclosure policy.