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Why Peloton Stock Is Up 36% in May After Jumping 19% in April

By Beth McKenna - May 12, 2020 at 7:51AM

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The coronavirus pandemic is providing a tailwind for the home exercise company.

What happened

Shares of interactive exercise-machine specialist Peloton Interactive (PTON -6.88%) are up 35.9% in May through Monday, May 11. This performance follows the stock's 18.6% rise last month, according to data from S&P Global Market Intelligence

By comparison, the S&P 500 index has returned just under 1% so far this month, and returned 12.8% in April. Last month's strong market performance was largely a bounce back from March's coronavirus-driven sell-off that sank the index (including dividends) 12.4%.

Since its September 2019 initial public offering (IPO) at $29 per share, Peloton stock is up more than 47%, as of May 11. Unlike many businesses, Peloton has been getting a boost from the COVID-19 pandemic, which has shuttered gyms and kept people home-bound under shelter-in-place orders.

Man running on a Peloton treadmill in a home.

Image source: Peloton.

So what

We can attribute Peloton stock's powerful May performance largely to the company's May 6 release of fiscal third-quarter 2020 results, which pleased investors. Shares shot up 16% the next day. 

In Q3, Peloton's revenue surged 66% year over year to $524.6 million. Growth was driven by a 61% rise in connected-fitness product revenue to $420.2 million, and a 92% increase in subscription revenue to $98.2 million. Connected-fitness subscribers soared 94% to more than 886,100 and paid digital subscribers jumped 64% to over 176,600.

On the bottom line, the company recorded a net loss of $55.6 million, or $0.20 per share, compared to a net loss of $38.6 million in the year-ago period. That result was much better than the loss per share of $0.35 that Wall Street had expected. The widening net loss was primarily driven by non-recurring legal expenses. 

Peloton stock's April performance -- up nearly 19% -- was robust, but it wasn't that standout given the broader market returned nearly 13%. 

Now what

Peloton has increased its full-year fiscal 2020 guidance. It now expects to end the year with 1.04 million to 1.05 million connected-fitness subscribers, representing growth of 104% year over year at the midpoint. It also projects revenue of $1.72 billion to $1.74 billion, growth of 89% at the midpoint. 

Beth McKenna has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Peloton Interactive. The Motley Fool has a disclosure policy.

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