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Why Peloton Stock Soared 34% in May

By Beth McKenna - Jun 8, 2020 at 11:18AM

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Shares of the interactive fitness company continued their coronavirus pandemic-fueled sprint last month.

What happened

Peloton Interactive (PTON 13.60%) stock soared 33.9% in May, according to data from S&P Global Market Intelligence. For context, the S&P 500 returned 4.8% last month.

Shares of the connected-fitness specialist have started June off on a strong note, rising 8.8% last week compared with the broader market's 5% return.

In 2020, shares of Peloton -- which held its initial public offering (IPO) in September 2019 -- have gained a whopping 61.6% through Friday, June 5. The market is flat over this period. 

Middle-aged man riding a Peloton bike in a bedroom.

Image source: Peloton Interactive.

So what

We can attribute Peloton stock's strong performance last month to a continuation of its momentum from April and to the company's May 6 release of fiscal third-quarter 2020 results that beat Wall Street's expectations.

Shares were up nearly 21% in early May before the company released its quarterly results, as investors drove up the stock on optimism about the results. Then shares popped 16% on the day after the release.  

As I wrote last month:

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. 

Moving out further than one month, the following chart shows how Peloton stock has performed so far in 2020. Shares have been getting a big boost from the shelter-in-place orders stemming from the COVID-19 pandemic. 

^SPXTR Chart

Data by YCharts.

Now what

Peloton management increased full-year fiscal 2020 guidance. The company is now expected to end the year with 1.04 million to 1.05 million connected-fitness subscribers, representing growth of about 104% year over year. Revenue is expected to land between $1.72 billion and $1.74 billion, representing year-over-year growth of 89% at the midpoint. 

In its fiscal Q3 shareholder letter, the company said that it "entered Q4 with a backlog of Bike deliveries in all geographies and sales continue to surpass expectations in the first several weeks of Q4 due to COVID-19."  

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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