What happened

Shares of Peloton (NASDAQ:PTON) jumped by as much as 8% this morning to reach fresh all-time highs ahead of the company's fiscal fourth-quarter earnings release after the market closes today. As of 12:30 p.m. EDT, the stock had given up all of those gains and was down 2%.

So what

Stay-at-home stocks continue to command premium valuations from investors and related companies have been reporting strong quarterly results driven by COVID-19's impacts on consumer behavior. Investors are hoping that Peloton will report an earnings beat as more people exercise from home during the pandemic.

Woman using a Peloton Bike in a bedroom next to a bed and a closet

Image source: Peloton.

Yesterday, both Goldman Sachs and Cowen reiterated buy (or equivalent) ratings on Peloton shares and increased their price targets to $110 in the wake of the fitness tech company's product announcement earlier this week that it was making its equipment more affordable. CNBC also featured two market experts yesterday that expressed bullish sentiments heading into earnings.

"We continue to believe that the market is underestimating the long-term growth of Peloton as the current pandemic both steepens the adoption curve and accelerates the company's progress along it," Goldman Sachs analyst Heath Terry wrote in a research note. "Therefore, we are raising our sales/gross profit estimates to account for the earlier-than-expected hardware launches."

Now what

Analysts are expecting Peloton to beat its guidance by a substantial margin. The consensus estimate calls for revenue of $580 million and earnings per share of $0.12, compared to the company's own sales forecast of $500 million to $520 million.

Peloton had issued its outlook in May when it was coping with supply constraints, as the coronavirus outbreak had disrupted its supply chain. The outlook assumed that the company would not resume Tread sales during the quarter. Peloton expects Connected Fitness subscribers to more than double to around 1.04 million to 1.05 million.

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