There's a lot on the plate of Peloton Interactive (PTON -4.05%) as it heads into this holiday-shortened trading week. One of this year's hottest stocks -- nearly tripling in 2020 and moving higher last week as the market in general took a step back -- reports fresh financials shortly after Thursday's close. It's going to be a strong quarter, but will it be strong enough to keep the upticks coming?

Peloton has become a market darling on the strength of its premium-priced platform. The four-figure treadmills and stationary bikes were gaining in popularity long before the pandemic kicked things up to an even higher demand level. With spinning class boutiques and full-service gyms unavailable during the early stages of the COVID-19 crisis the migration to in-home fitness began to accelerate. Peloton has been a major beneficiary of the shift to at-home workouts, but every quarterly report is going to be a big test for the hot stock.

A woman takes a break from her Peloton bike workout to look out her window.

Image source: Peloton Interactive.

Burning calories -- and bears

Expectations are high for Thursday afternoon's report, and Peloton itself set the bar high. Back in May it was targeting between $500 million and $520 million in revenue for the fiscal quarter ending in June. This would be 128% year-over-year growth at the midpoint, and nearly double the 66% surge it posted for the fiscal third quarter ending in March. 

Wall Street pros think Peloton's guidance is dated and conservative. The consensus estimate calls for $578.2 million in revenue, a blistering 164% increase since the prior year's showing. Analysts also see Peloton coming through with its first quarter as a profitable company.

It's easy to see why the market is holding out for more than Peloton's own public forecast. Peloton is conservative. It was only eyeing 50% top-line growth in the previous quarter, eventually coming through with a 66% surge. There's also a blip in the seasonality that should really accelerating things. 

Peloton's fiscal fourth quarter is historically weak. Subscription revenue is predictably steady with sequential upticks, but low-margin product sales juice up the second and third fiscal quarters. The second fiscal quarter -- the three months ending in December -- is Peloton's strongest period, since it includes holiday sales. Peloton bikes and treads are high on the list of affluent fitness buffs. The third quarter also comes in strong as resolutions for the new year kick in come January. However, it's fair to say that there was an atypical spike in demand for the months of April, May, and June when folks realized that they needed Peloton hardware and its sticky ecosystem of live and on-demand workouts to keep them motivated during the shelter-in-place phase of the pandemic.

This is going to be a strong report, and that's with Peloton telling folks placing new orders that they will have to wait at least five weeks for their new bikes and treadmills in light of heavy demand. It also wasn't taking treadmill orders until later in the summer -- after the quarter came to a close -- because it couldn't safely complete the in-home installation and delivery. 

Watching the wheels go round

The fiscal fourth quarter should be ridiculously strong. It should be closer to the $578 million that analysts were targeting than the $510 million midpoint of its own guidance set four months ago. The stock's heady gains ahead of the report suggests that even Wall Street's rosy outlook isn't optimistic enough, and we could be looking at Peloton clocking in north of $600 million.

The real driver for the stock at this point will be its guidance for the fiscal first quarter that ends later this month. It will have a better read on this quarter than it did last time out given the late timing of its fiscal fourth-quarter financial release, so the market's going to take it more seriously.

Are product sales still strong? Is there any progress on a less expensive stationary bike that Peloton's CEO was talking about earlier this year? Is there any truth to the chatter dating back to last year that a rowing machine was in the works? Are monthly workouts per member still holding up after the record showing it posted for its fiscal third quarter? 

Peloton won't have all of the answers on Thursday, but it's hard to bet against a stock that always seems to be a step ahead of the questions. Peloton remains one of the market's hottest growth stocks, and this week would not be a good time to cool down.