Peloton Earnings: Will They Sprint By Expectations Again?

Peloton Interactive (PTON 5.12%) is slated to report its results for the first quarter of fiscal 2021 (covering July through September 2020) after the market close on Thursday, Nov. 5. 

The maker of connected home-exercise equipment is heading into its report on a strong note. Last quarter, it crushed Wall Street's estimates for both the top and bottom lines, as the COVID-19 pandemic continued to provide a powerful catalyst for growth. Many gyms around the world were temporarily closed to halt the spread of the novel coronavirus and there are surely many consumers who are still shunning them.

Peloton bike and treadmill users aren't the only ones associated with the company who are generating endorphins. Investors watching their stock climb have probably been producing their fair share of the feel-good hormones. In 2020, shares of Peloton, which held its initial public offering (IPO) in September 2019, have gained 331% through Friday, Oct. 23. The broader market has returned 8.9% over this period. 

Here's what to look for in Peloton's upcoming report. 

Image source: Peloton Interactive.

Key numbers

Data sources: Peloton and Yahoo! Finance. YOY = year over year.

Management guided for revenue of $720 million to $730 million, representing growth of 218% year over year at the midpoint. It didn't provide earnings guidance.

For context, last quarter, Peloton's revenue skyrocketed 172% year over year to $607.1 million, speeding by the $566 million consensus estimate. Growth was driven by a 199% rise -- or tripling -- in connected fitness product revenue to $485.9 million, and a 99% increase -- or doubling -- in subscription revenue to $121.2 million. The number of connected fitness subscribers grew 113% year over year to 1.09 million.

Bottom-line results were also robust. Peloton turned in its first ever quarterly profit. Net income landed at $89.1 million, or $0.27 per share, compared to a net loss of $47.4 million in the year-ago period. This result also sprinted past the Wall Street estimate, which was for earnings per share of $0.10.

Bike+ sales

Besides the headline numbers, investors will want to focus on early sales results for the company's new bike, Peloton Bike+. Sales of this upgraded model began on Sept. 9 in the U.S., Canada, U.K., and Germany.

With the introduction of the new bike, priced at $2,495, Peloton dropped the price of its original bike from $2,245 to $1,895. (At the same time, the company announced it was rolling out a new, less expensive treadmill, which will be available in late December in the U.K., and early next year in the U.S., Canada, and Germany.)

Supply-demand dynamics 

Investors will also want to pay attention to what management has to say about production capacity and supply-demand dynamics in its shareholder letter and on the earnings call.

Peloton has been experiencing a "good problem" as long as it doesn't persist too long: Demand has been so strong that the company has been unable to churn out its exercise equipment fast enough to keep up. If this situation lasts too long, however, some potential buyers are likely to purchase equipment from another company. Adding to wait times for some customers, the company has reportedly recently been experiencing delivery delays due to congestion issues at the Port of Los Angeles.

Guidance

The market looks ahead, so its reaction to Peloton's report will probably hinge more on guidance than on current results, relative to Wall Street's estimates. So investors should know Wall Street's expectations for the fiscal second quarter, the holiday quarter: Analysts are modeling for revenue to increase 97% year over year to $920.1 million and adjusted EPS to land at $0.08, compared to a loss per share of $0.20 in the year-ago period.

Peloton is scheduled to report its fiscal Q1 2021 results after the market close on Thursday, Nov. 5. An analyst conference call is slated to follow at 5 p.m. EDT.