Shares of Peloton Interactive (NASDAQ:PTON), the largest interactive fitness platform in the world, were up 14% Thursday morning after the company beat revenue estimates and reported a surge in memberships.
While the tragic COVID-19 pandemic is crippling many businesses across the globe, Peloton is uniquely positioned as a fitness platform Americans can access from home. Revenue soared 65% to $524.6 million versus the prior year, blowing away analysts' estimates of $486 million. Earnings per share checked in with a loss of $0.20, which was worse than analyst estimates of a loss of $0.17 per share.
But investors accepted that wider-than-expected loss amid a surge in memberships. Paid digital subscribers jumped 64%. The company generated $98.2 million from subscriptions during the third quarter, a substantial 92% increase from the prior year, and product sales jumped 61% to $420.2 million. Even better news for investors: The momentum seen from COVID-19 effects in the third quarter has continued into the fourth.
"Connected Fitness Product revenue exceeded our expectations across all geographies driven by strong demand for our Bike," Peloton said in a press release. "During the last few weeks of Q3, we saw a significant increase in demand for our bike which has continued into Q4 so far."
If those revenue and membership statistics weren't enough to prove Peloton was doing well despite COVID-19 disrupting the world as we know it, the company actually raised guidance at a time most companies won't even issue guidance. Management will have to persuade investors that this isn't a temporary spike and that there is a long-term vision for the business.
The good news is that third-quarter churn was 0.46%, the lowest level in four years, and its 12-month retention rate was a strong 93%. Furthermore, the company plans new products to take its business to a higher level, including a cheaper treadmill and a rowing machine. Time will tell if this is merely a short-term boost, but as shares jumped to an all-time intraday high Thursday, it's clear investors are buying in.