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Peloton PTON stock was an early coronavirus superstar and it went on a massive run until early 2021. Since then, the high-end, high-tech stationary bike company has fallen back to Earth amid shipment delays, product safety issues, and other Wall Street concerns.
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Despite the fall, investors might want to consider buying beaten-down PTON stock with it set to release first quarter FY22 financial results on Thursday, November 4.
Home Workout Growth
Peloton sells different tiers of connected bikes and treadmills, starting at a recently-reduced $1,495 for the bike and $2,495 for the tread. The company also makes money from recurring subscription fees, which are crucial to its long-term success.
These include its $39 per month All-Access Memberships. Plus, consumers who don’t own PTON equipment can pay $12.99 a month for a digital membership that allows them to take classes for indoor cycling, running, strength, and more.
The firm is poised to grow for years as part of a broader connected fitness world that features Lululemon’s LULU Mirror, other up-and-coming players, and revamped legacy firms such NordicTrack. In fact, Apple AAPL is rolling out health-focused and fitness offerings.
Even as things return closer to normal, it’s unclear how quickly gyms will return to pre-covid levels. There is also no reason why many of Peloton’s wealthier customers won’t simply decide to do both down the road.
Peloton is also focused on other ways to expand its business. The company in April completed its purchase of commercial fitness firm Precor. The deal will improve its manufacturing and help it break into areas such as hotels and condo buildings. And it has a partnership with it UnitedHealthcare.
Other Fundamentals
PTON shares skyrocketed from under $30 in March 2020 to over $150 by early 2021. The stock then began to tumble as Wall Street sold overheated pandemic winners and stocks they worried would suffer in a reopened economy. On top of that, Peloton officially recalled on May 5 the Tread+ Treadmills “after one child death and 70 incidents; recall of tread treadmills due to risk of injury.”
PTON has dropped 40% in 2021 and 45% from its records. The stock began a short-lived comeback in early May after it fell below some key technical levels. And it’s popped 13% in the last month to close regular trading hours Monday at $92.83 a share.
Peloton stock is currently attempting to fight its way above its 50-day moving average. PTON also sits at neutral RSI levels of 50, even as many tech names reach overbought territory.
Investors should also note that the current Zacks consensus price target of $137.04 a share marks 47% upside to Peloton’s current levels. And the stock is trading right near its year-long lows at 4.7X forward 12-month sales, which represents a 50% discount vs. its highly ranked Leisure and Recreation Products (top 11% of over 250 Zacks industries).
Growth and Outlook
PTON’s fiscal 2020 sales soared 100% to $1.8 billion and its FY21 revenue skyrocketed another 120% to $4.0 billion (the firm went public in September 2019). The firm closed the year with over 2.33 million Connected Fitness Subscriptions, up 114% YoY. Meanwhile, its paid Digital Subscriptions grew 176% over 874K.
Zacks estimates call for its 2022 revenue to climb 34% to reach $5.37 billion, adding another $1.4 billion to the top-line, or more than its entire FY19 revenue. The home fitness power is then projected to grow its sales by another 25% to pull in $6.73 billion in FY23.
PTON is projected to report a larger adjusted loss this year of -$2.13 a share vs. -$0.64 in FY21. It is then projected to trim its adjusted loss to -$0.55 in FY23. Prior to its big miss last quarter, Peloton had crushed our quarterly EPS estimates.
Bottom Line
PTON currently lands a Zacks Rank #3 (Hold) and many investors might want to wait for its actual Q1 results and guidance before they consider hopping on Peloton. That said, Wall Street remains largely high on the beaten-down new-age home gym firm, with 14 of the 19 broker recommendations Zacks has at “Strong Buys,” with only one “Strong Sell.”
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