Peloton Soared 11% Yesterday — Is a Comeback on the Cards?

Should I Buy Peloton Stock Before Its Earnings Report This Week?

Peloton has some tough comparables to match when it reports earnings this week, so should you buy the stock ahead of the release?

The popular fitness company was one of the most in-demand products during the pandemic as users flocked to its websites to order equipment so they could stay in shape at home. However, as the effects of lockdowns wear off, is Peloton (NASDAQ: PTON) stock still a good investment? 

Shares in the connected fitness company have been extremely volatile in 2021 so far, and are down over 13% in the past six months. A big earnings beat might be enough to send the stock soaring. However, some investors are beginning to worry that Peloton might have been a pandemic fad. 

If Peloton wants to assure shareholders that its bikes and treadmills will remain popular, even as gyms reopen across the world, it needs to report strong earnings this week and answer any lingering questions about shipping delays and safety issues. During the quarter, Peloton had to recall some of its treadmills due to safety concerns after the death of one child was linked to its Tread+ machines. 

When is Peloton reporting earnings? 

Peloton is set to report financials for the fourth quarter after the market close on Thursday, 26 August. To access Peloton’s earnings report, visit its Investor Relations page here

Should I buy Peloton stock now before its Q4 earnings? 

Shareholders are not expecting Peloton to report great numbers this week, primarily due to these figures being compared to the hyper-growth the company experienced last year during the pandemic. That rapid growth was mainly due to people being stuck at home, but now as people can venture to outdoor exercise activities and rejoin gyms, things are not looking so good for Peloton. These tough comparisons will make it very difficult for the fitness firm to post an earnings surprise. 

Wall Street expects Peloton to report Q4 earnings:

  • A $0.44 per-share loss, compared to the $0.27 profit it booked in the same quarter last year 
  • Revenues of $921 million, which would be up 52% year-over-year. 

If we look at the previous quarter, Q3, which was also compared unfavourably to pandemic highs, we can see that the company actually had a great quarter. In Q3, Peloton invested heavily in its supply chain to improve delivery times. This was reflected in its sales jumping 141%. In addition, subscription revenue also made a big leap, up 144% from 2020 levels to $239.4 million, making up 19% of total revenue. If it kept up with this momentum in Q4, the company might be able to shake off any concerns around its future growth. 

In its last earnings call, the exercise equipment maker said that due to the recent mass product recall, it now expects fourth-quarter sales to fall by $165 million. Therefore, investors have been warned about this drop in revenue. However, these losses are expected to stand out and if they are not met with an earnings beat, we can expect a sell-off of Peloton stock after its earnings call. 

Is Peloton stock a buy? 

While Peloton does have challenges, it is also still in expansion mode. ​​In late July, the company announced its move into gaming. The fitness bike maker is planning to launch its first in-app video game, ‘Lanebreak’ ,to members-only later this year ahead of its full 2022 launch. The move could open up a new avenue of revenue for Peloton as it attracts new types of subscribers, diversified subscription possibilities, and more. These kinds of announcements are great for the business and Peloton should discuss this further in its earnings release this week. 

Peloton is also a very popular product and it is unlikely that fans will turn away from the brand because of a few short-term shipping challenges. Now that it has addressed safety concerns, it has the opportunity to become the ultimate workout-from-home exercise tool. As we have seen, people don’t want to return to the office, and that might mean that gym memberships remain cancelled, which would be great news for Peloton. 

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