Sometimes a blowout isn't enough. Peloton Interactive (PTON 5.42%) came through with one of the best earnings reports of the summer last week, but Wall Street wasn't impressed. The fast-growing player that has cornered the market for high-end at-home fitness exceeded expectations and offered rosy guidance, but the shares still moved 4% lower on Friday.
To be fair, it's not as if shareholders are hurting after Friday's reactionary downticks. Peloton has still nearly tripled in 2020, entering the new trading week up 196% year to date. Let's take a closer look at where Peloton goes from here as it ends fiscal 2020 in as great shape as some of its dedicated stationary bicycle and treadmill users.
Image source: Peloton Interactive.
Class act of spinning class
It's not a surprise to see Peloton fare well in the new normal. If you can afford the four-figure price tags on the bikes and treads as well as the $39-a-month connected fitness subscription Peloton makes sense as a way to duplicate an interactive workout experience from home.
Peloton's popularity is exploding. Revenue shot 172% higher in its latest quarter, and it finally came through with its first quarterly profit. Its results trounced analyst targets on both ends of the income statement.
We already knew that Peloton topped a million connected fitness subscribers for the period, and the 1.09 million premium members on that front is a 113% increase over the past year. The digital subscriptions that Peloton offers for folks without one of its bikes or treads more than tripled to hit 316,800 paid members. Peloton's reach is now 3.1 million members.
It probably also goes without saying that we're using our Pelotons more than ever. With folks generally staying close to home and traditional outlets for fitness sessions either closed or not entirely safe, the average connected fitness subscriber logged in 24.7 monthly workouts during the period. The old record was 17.7 workouts a month set in the previous quarter. Peloton customers tend to stick around, even if that's implied given the stiff upfront investment for the hardware. Its 12-month retention rate is checking in at a healthy 92%.
Demand remains strong, and Peloton closed out the quarter with an order backlog of $230 million. Even though new orders are taking at least several weeks to be delivered, Peloton surprised the market a few days ago by lowering the price of its bike and introducing a new lower-priced treadmill. It's also now offering folks a deal to trade in their older Peloton bikes and treads in exchange for $700 in credit toward a new one.
These would be desperate moves in the hands of a struggling company, but in Peloton's pulsating tempo, we're seeing a market-widening push for the mainstream. Lower price points and the mystery of what Peloton will do with with the trade-in stationary bikes and treadmills it receives and might refurbish will find it casting a wider net in fishing for the masses.
There doesn't seem to be any near-term obstacles to keep Peloton from hitting its goal of topping 2 million connected fitness subscribers by the end of the new fiscal year, a goal that would translate into at least 90% growth. Some of these fresh moves to reach a wider audience can mean that it's just scratching the surface. Peloton's stock isn't cheap by any measuring stick, but you have to pay up for the best growth stocks. Right now Peloton is one of the market's top speedsters, and for now that means the stock's future is as bright as its past.
