Please ensure Javascript is enabled for purposes of website accessibility

Peloton Earnings: What to Watch

By Daniel Sparks – Aug 21, 2021 at 9:41AM

Key Points

  • Peloton is expected to take a big financial hit from its recent recall.
  • Analysts, on average, are modeling for 50%-plus revenue growth.
  • Investors will look to see if users remained engaged amid a reopening economy.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Despite a recent recall of treadmills, analysts expect huge growth from Peloton during fiscal Q4.

Peloton Interactive (PTON 13.00%) will release its fourth-quarter and full-year results next week. Investors expect huge sales growth from the company -- albeit much slower than growth in the fiscal third quarter. The quarter will be an interesting one. Not only is Peloton lapping some extraordinary year-ago comps, but the company will reveal how well it is faring amid a recall of its treadmills. 

Ahead of the earnings report on Thursday, here's a preview of some of the key items investors are going to want to watch.

A person using a Peloton bike at home.

Image source: Peloton Interactive.

Recall effect

Peloton said in early May that it was voluntarily recalling its Tread+ and Tread treadmills to address some safety concerns. In addition, the tech company stopped sales of its Tread+ as it worked on hardware modifications. Its Tread product was only a part of a limited invitation-only release, which had last closed in March.

Of course, the big question on investors' minds is likely how much the recall is costing the company. In Peloton's fiscal Q3 earnings call, CFO Jill Woodworth said she estimated a total cost of $165 million during fiscal Q4.

Here's how this is expected to break down: $105 million would come from lost revenue from stopping sales of its treadmills, and $50 million from returns. Finally, Peloton expects subscription revenue to be negatively affected by $10 million as monthly access subscriptions for treadmill content are waived.

Investors should look to see if the negative financial effect was in line with these expectations or not.

Connected fitness subscriptions

One key area investors will want to check on is Peloton's connected fitness subscriptions. During Q3, subscriptions increased 135% year over year to 2.08 million. Of these subscriptions, paid digital subscriptions soared 404% year over year to 892,000.

While investors should look for more strong growth in these metrics, it will be interesting to see if engagement improved even as fewer people were spending time at home during the quarter as the global economy opened up. In Q3, workouts per connected fitness subscription were 26, up 47% year over year. While meaningful sequential improvement is unlikely, investors should look for robust year-over-year improvement.

Guidance

Finally, investors should check on Peloton's guidance for fiscal first-quarter revenue. Analysts expect the company to guide for revenue of $1.06 billion during the quarter. This would represent 41% growth -- a deceleration from the 52% revenue growth management expects in fiscal Q4.

Peloton plans to announce its fiscal fourth-quarter and full-year results after market close on Thursday, Aug. 26.

Daniel Sparks has no position in any of the stocks mentioned. His clients may own shares of the companies mentioned. The Motley Fool owns shares of and recommends Peloton Interactive. The Motley Fool has a disclosure policy.

Stocks Mentioned

Peloton Interactive Stock Quote
Peloton Interactive
PTON
$13.30 (13.00%) $1.53

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.