Peloton to report Q4 earnings after the market close on Thursday
Peloton (PTON) is scheduled to report results of its fourth fiscal quarter after the market close on Thursday, September 10, with a conference call scheduled for 5:00 pm EDT. What to watch:
1. GUIDANCE: In May, Peloton raised its fiscal 2020 revenue view to $1.72B-$1.74B from $1.53B-$1.55B, against estimates at that time of $1.56B, with 1.04M-1.05M ending Connected Fitness Subscribers, or growth of 104% at the midpoint, which compares to previous guidance of 920,000-930,000.
MKM Partners analyst Rohit Kulkarni expects the company to register a "big beat" with its Q4 earnings, adding that consensus estimates for FY21 are "stale" and do not reflect "real-time revisions" to buy-side expectations, as he expects Peloton to provide its initial outlook for next year.
2. EXPANDED SUITE OF PRODUCTS: On September 8, Peloton announced the introduction of the Bike + and the new Tread, growing its portfolio of connected fitness products and experiences. The new exercise bike, which costs $2,495, joins as the premium version of Peloton’s original stationary cycle, which will remain on sale at $1,895, and the Tread, which also costs $2,495, is the new entry-level Peloton treadmill product, with the original becoming the Tread+ at $4,295. The new Peloton Bike+ includes a 23.8″ rotating, HD resolution touchscreen display. Peloton also announced "Bike Bootcamp," which includes strength training alongside cardio exercises.
Wedbush analyst James Hardiman said the treadmill category could prove to be the key to unlocking much more substantial upside for Peloton. In normal years, the treadmill category is 2-3-times as large as the home exercise bike category, selling about 5M units per year, he noted. His 150K-200K unit Peloton tread estimate for 2022-2023 represents a "fairly minuscule" market share, and so if the new Tread truly resonates with consumers, the company's treadmill business could conceivably be as big or bigger than its bike business. The earlier than expected launch should allow Peloton to capitalize on the current demand for its products, its newly enlarged digital audience, and the ongoing uncertainty around out-of-home fitness options, Goldman Sachs analyst Heath Terry said. The analyst continues to believe that the market is underestimating the long-term growth of Peloton.
3. MEMBER GROWTH: Peloton announced on May 12 that the company surpassed 1M aggregate Connected Fitness Subscribers. Following the announcement, Citron Research tweeted: "$PTON in perspective. 2020 mkt cap up $5 bil vs. connected sub up 300k or $17k per sub. 2020 $TDOC mkt cap up $8bil vs. paid members up 6.2 million or $1300 per sub. This is retail mania you can love the product but stock has peddled its way to stupidity."
4. 'UNIQUE POSITION': William Blair analyst Ralph Schackart believes Peloton remains in a "unique position" during the coronavirus pandemic to outperform, with shelter in place driving better than expected sales and opening up its addressable market to a younger millennial demographic. Post-COVID-19, this will lead to a larger installed base of subscribers and Peloton should emerge stronger, contended Schackart.
5. SIGNIFICANT UPSIDE POTENTIAL: JPMorgan analyst Doug Anmuth said that despite the 195% rally year-to-date, he continues to like Peloton shares into earnings and believes there is "significant upside potential" to consensus estimates both near and long term. The company's biggest near-term challenge is keeping up with elevated demand, with bike order-to-delivery times of around seven weeks on average, according to channel checks, Anmuth said. This is happening even though Peloton doubled its manufacturing pace since March, and management's prior expectation of more normalized delivery times by July or August, added the analyst. He contended that while the delay is not optimal, it bodes well for ongoing demand and sustained sales strength.