Inside the Numbers
Due to gyms being closed and many people electing to work out from home, there has been a shortage of workout equipment, and Peloton's products have been among the hottest. It resulted in a revenue surge that the company doesn't expect to abate until sometime next year which is attributed to the recent spike in case counts over the past couple of months.
The company also posted earnings per share of $0.27 versus expectations of $0.10 per share. Revenue was $607.1 million which topped consensus of $583 million and was significantly higher than last year's $222.3 million in the same quarter.
Peloton ended the quarter with 1.09 million connected subscribers which are an increase of 113% from last year. In total, it has 3.1 million subscribers. Gross margins also slightly expanded to 47.6% which indicates that profitability is increasing with scale.
Overall, the coronavirus has resulted in the company achieving mid to late-2021 growth targets this year in terms of units sold and subscribers. Its forecast also topped expectations as the company anticipates 2021 revenue between $3.5 billion and $3.65 billion, while analysts were looking for $2.7 billion.
Reports indicate that the company is also planning to launch a cheaper bike, a more expensive bike with a rotating screen, and a lower-priced treadmill. Another interesting insight is that the company has stopped all advertising due to more demand than it can handle.
Stock Price Impact
After the report, its shares were 8% higher, although shares gave back some gains to largely finish unchanged. It may be due to investors already having high expectations or the risk-off environment for tech stocks over the past week. Some are saying that this quarter may mark the stock's peak in terms of second-derivative measures.
Peloton has become a "battleground" stocks with people having strong opinions on it. Some people see it as the latest fitness fad, and say it's nothing more than a $300 exercise bike with a $500 iPad on top of it that it is selling for a couple of thousand dollars with a subscription fee for its classes.
Others see it as a revolutionary product. The company has shown a remarkable ability to keep its users with churn under 1%, meaning that people continue to use the bikes and treadmills. Further, the number of workouts per subscriber per month has continually increased which is due to an increasing number of workout options and people enjoying the benefits.