Peloton PTON stock hit records in mid-January as it continues its impressive run off the market’s March 2020 lows. The remote workout standout has seen its stock price pullback since then and it rests about 10% off its recent highs heading into the release of its Q2 fiscal 2021 earnings results that are due out after the closing bell on Thursday, February 4.
Working Out
Peloton is a high-end, high-tech stationary bike firm that has attracted more customers as many gyms remain closed around the country. Even if things return closer to normal by the summer as the vaccine is rolled out, it is unclear how quickly people will race back to crowded gyms.
The New York-based company was also growing before the virus within a group of higher-end connected fitness products. This includes Mirror, which athleisure giant Lululemon LULU bought for $500 million, as well as other bikes, rowing machines, and more. The at-home fitness market is so hot that even Apple AAPL has jumped into the field.
Peloton, which was founded in 2012 and went public in the fall of 2019, allows users the ability to follow along with classes on built-in TV monitors. PTON now offers different tiers of bikes and treadmills that currently start at $1,895 for the bike and $2,495 for the tread.
Plus, it makes money from its $39 per month All-Access Memberships. Meanwhile, people who don’t own Peloton equipment can pay $12.99 a month for a digital membership that allows them to take classes for indoor cycling, running, strength, and more.
Keep on Climbing?
The company closed last quarter (Q1 FY21) with 1.3 million connected fitness subscriptions, up nearly 140%. Meanwhile, its digital subscriptions soared over 380%. This helped lift Peloton’s revenue by a whopping 232% to $758 million.
Peloton then impressed investors again when it announced in December that it agreed to buy commercial fitness-equipment company Precor Inc. for $420 million. The move is projected to help improve its manufacturing capacity as it has struggled to keep up with the massive pandemic-driven demand that caused long wait times for many customers. The deal is also expected to help it break into commercial spaces like hotels and condo buildings.
All of this growth has helped PTON stock soar 340% over the last year to double fellow high-flyers such as Shopify (NYSE:SHOP) SHOP. Yet, as we mentioned at the top, its shares sit about 10% off their recent highs at around $148, which might set up a better buying opportunity for those high on the stock.
Despite its huge run, Peloton is trading at 9.1X forward 12-month sales. This marks a discount to its own year-long highs of 10.6X and comes in below Lululemon’s 10.1X and SHOP’s 35X. And the stock is not currently overbought in terms of the Relative Strength Index, with PTON resting at around 50—an RSI above 70 is often regarded as overbought, with any number below 30 considered oversold.
Zacks estimates call for its Q2 revenue to jump 120% to $1.03 billion. This is projected to help it swing from an adjusted loss of -$0.20 per share in the year-ago period to +$0.10. Looking further down the road, PTON is projected to see its revenue soar 118% to come in at $3.97 billion in fiscal 2021, and swing from -$0.32 to positive EPS of +$0.45.
Bottom Line
Peloton’s fiscal 2021 growth is projected to outpace its 100% climb in FY20. The company is then projected to pull in $1.3 billion more revenue in FY22 to reach $5.3 billion and nearly double its adjusted earnings.
Peloton is currently a Zacks Rank #3 (Hold), and it has crushed our bottom-line estimates in the past two quarters. And even if it faces some near-term selling pressure, or fails to impress Wall Street on Thursday, the company might be worth considering for longer-term investors.
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