© Reuters. Can Peloton stay in the face, post-pandemic?
Peloton Interactive, Inc. (NASDAQ:), an American interactive fitness platform and exercise equipment company, reported a larger-than-expected loss of $1.05 per share for the fourth quarter of its fiscal year. 2021 on Aug. 26. Shares of Peloton fell after the earnings release as the company reported slow growth last quarter and warned that rising commodity costs, rising freight rates and falling bicycle machine prices will affect profits in the coming quarters.
Peloton is one of the biggest winners in an era of multiple lockdowns and travel restrictions in 2020, and its stock jumped 450% last year as investors focused on the winners. of the new normal. Now that pandemic-related restrictions are eased and supply bottlenecks come to light, Peloton appears to be experiencing lower engagement and appears to be fighting to maintain its position. its market leader. (See Peloton stock chart on TipRanks)
Despite these challenges, Peloton can create competitive advantages in the long run, but I remain neutral with the company until convincing evidence of those advantages is available.
Peloton is facing some challenges
Peloton has a larger membership of 5.9 million people, but many users are returning to gyms and outdoor activities with the easing of movement restrictions and that is proving to be a big hit. obstacles to the growth of the company. According to data from Apptopia, usage of the Peloton mobile app has dropped 42% since April, which shows the challenges the company faces due to the reopening of the economy.
Peloton is also facing strong competition from Hydrow Rowing Machine, MIRROR and SoulCycle, all of which pose a threat to Peloton’s long-term growth goals. Although revenue has doubled in the past 2 years, Peloton has still not been able to break through in terms of profits, which is also a concern.
In addition to slowing growth, investors may be concerned about the 20% discount on the Peloton Bike, the company’s best-selling product, and increased marketing spending to attract new customers. While lowering the price of its flagship machine may help the company attract new customers, Peloton’s margins will come under additional pressure as a result of the decision.
Move in the right direction
The Peloton Tread, which was recalled a few months ago due to safety issues, is now available for purchase in the US, UK and Canada again, with customers able to return their existing treadmill for a refund. full refund until November 6, 2022 On August 24, the company announced that it had improved the design and safety aspects of the Tread to address the Safety Commission’s concerns. Consumer Products. Earning the trust of regulators and customers is key to Peloton’s success, and the company appears to be on the right track on this front.
In addition, Peloton paid a total of $78.1 million to acquire Atlas (NYSE:) Wearables, Otari Studio, and Aiqudo to expand its products and services beyond fitness equipment. It also expects to invest approximately $400 million over the next 2 years in the construction of Peloton Output Park in Troy Township, Ohio to increase production capacity and reduce order-to-delivery time.
The popular fitness platform has spent heavily on marketing and secured partnerships to attract and retain new customers. To that end, the company has partnered with UnitedHealth Group Incorporated (NYSE:), Adidas AG (DE:) (ADDYY (OTC :)) and Beyonce to bring their products to a wider audience.
Wall Street’s Take
Based on 22 Wall Street analysts who gave Peloton Interactive a 12-month price target, Peloton’s median price target is $131.55, implying a 15% increase from the current market price.
While this suggests there is a large margin of safety to invest in Peloton, Wall Street analysts may be forced to downgrade the stock in the coming months if the company continues to report mobile app usage. Their movement and exercise equipment declined. Many analysts are trying to gauge how Peloton’s measure will perform in the post-pandemic era, so it would be reasonable to expect analysts to update their valuation models with data. new materials as they become available.
Buy and take away
Peloton intends to drive growth by increasing marketing spend and partnership deals, and is expected to be profitable in Fiscal 2023. Although the home fitness market can be expected to Going forward, Peloton needs to overcome many challenges to achieve its financial goals over the next few years, which makes it a very risky stock to bet on.
At the time of publication, Dilantha Da Silva did not have a position in any of the securities mentioned in this article.
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