Peloton Interactive benefits from closed US gyms

Peloton Interactive benefits from closed US gyms

26 November 2020Reading time: 3 minutes

Peloton Interactive manufactures and delivers fitness equipment directly to the American consumer. The fitness machines are equipped with special video-display screens, with which the user can participate in digital fitness classes or receive video instructions. In addition to purchasing the fitness equipment, consumers can also take out a subscription to participate in interactive fitness classes.

As a result of the coronavirus outbreak, most American gyms were forced to temporarily close. This caused a booming demand for Peloton's fitness equipment this year. Not only has this impacted the company's sales figures, it has also caused delivery problems. The first quarter figures of the 2021  broken fiscal year, which Peloton released on 5 November reflected these developments.

First quarter results broken fiscal year 2021

One of the things that stood out in the first quarter figures, is the gigantic annual increase in sales from 232 percent to USD 757.9 million. The revenue increase is the result of the also significantly increased membership database. For example, the number of Connected Fitness subscriptions rose by 137 percent on an annual basis to 1,33 million and the total number of subscribers rose to more than 3.6 million. The gross margin for the past quarter was 43.4 percent.

An important milestone is that Peloton managed to make a profit for the first time. In the first quarter the EBITDA rose to USD 118.9 million and the net profit was approximately USD 69.3 million. This resulted in earnings per share of USD 0.20. Over the first quarter of the broken fiscal year 2020, the company recorded a loss of USD 49.8 million or USD 1.29 per share.

Expectations current fiscal year

Peloton will continue to invest in its own products and promotion in the coming period. The publication of the recent quarterly results, states that the company wants to improve the software of its products and that new fitness programs are being developed. Peloton recently also announced a partnership with world star celebrity Beyoncé to develop a special fitness program.

However, the company is currently facing supply problems as a result of the greatly increased demand, which could be due to temporary issues such as storage issues and forest fires. Peloton expects to resolve these problems in the coming months.

In terms of results, the interactive fitness equipment maker expects a total revenue of USD 1 billion for the second quarter of its broken fiscal year 2021, as well as a gross margin of approximately 39 percent and an EBITDA of USD 70 million. The number of Connected Fitness subscribers is expected to increase further to 1.63 million in the second quarter. For the full fiscal year 2021, the company expects this number to rise to 2.17 million and a total revenue of USD 3.9 billion, with an EBITDA of USD 300 million. It remains to be seen if and for how long the global lockdowns will continue to affect the popularity of Peloton's fitness equipment positively and whether members will renew their subscription.

Stock price development

The stock price of Peloton Interactive is now (13.11.2020) at USD 108.72, an increase of 318.48 percent year-on-year. At this moment, it remains unclear whether the American fitness equipment manufacturer will actually solve the delivery problems, which may have a negative effect on the results.

The future price of the stock is subject to several political, industrial and sector specific as well as economic factors. Investors should consider these risks when making their investment decisions. Developments can be different at any time than investors anticipated on, which could result in capital losses.

Don’t miss any investment idea. Subscribe now to the Vontobel newsletter!

Vontobel products on Peloton are tradable at DEGIRO.

Discover Vontobel’s product on our Website.

Important legal information:
This information does not constitute a financial analysis, but product advertisement. Thus it does not meet the legal requirements to ensure the impartiality of financial analysis and is not subject to trade prohibition before the publication of a financial analysis.
Fordetailed information, particularly regarding the structure and the risks associated with an investment in the derivative financial instruments, prospective investors should read the Base Prospectus, which is available together with the Final Terms and any supplement to the Base Prospectus in electronic form on the issuer’s website: http://beursproducten.vontobel.com. Additionally, the Base Prospectus, anysupplements to the Base Prospectus and the Final Terms are available inprinted form, free of charge, at the registered office of the issuer: Vontobel Europe AG, Bockenheimer Landstrasse 24, 60323
Frankfurt am Main, Germany.

Investors should consider the applicable selling restrictions.
Companies of the Vontobel group may directly or indirectly pay commissions in varying amounts to third parties (e.g. brokers) in connection with the public offer and the distribution of the derivative financial instruments. Further information is available upon request from your distribution partner. 

03/03/2021 03:19:46