Peloton Interactive (PTON) is arguably one of the hottest names in the fitness space. With more than 3.1 million members, the 8-year-old global brand is looking to expand its reach. Peloton stock was one of the bright spots in the coronavirus stock market rally, with a gain of more than 440% in 2020.
“The world changed with Covid,” Peloton CEO John Foley said in an interview in September. “We plan to be the global digital fitness technology platform that allows you to work out at home and not have to travel.”
Peloton generates most of its revenue through sales of bikes and treadmills, which range in price from $1,895 to $4,295. The All-Access membership for owners of its expensive equipment runs $39 a month. A digital membership – with no access to bike or tread classes – is $12.99 a month.
But whether the fitness platform can continue to capitalize on changing consumer habits and grow its membership at a healthy clip beyond the pandemic remains a key question.
Peloton Stock Earnings
Peloton Q2 earnings, reported on Feb. 4, were better than expected. Peloton’s earnings surged to 18 cents per share – a 190% increase – on revenue of $1.06 billion.
Wall Street anticipated the fitness brand to report earnings per share of 10 cents on revenue of $1.02 billion. However, Peloton stock failed to get a meaningful boost from the quarterly report.
Connected fitness subscriptions grew 134% to 1.67 million. Paid digital subscriptions skyrocketed 472% to about 625,000.
“Digital continues to be a high-growth sales channel for connected fitness products,” Foley said on the Feb. 4 earnings call. “We will continue to build on the success of our strength content pillar over the coming quarters.”
Production delays for the popular bicycle and treadmill products continue to hold Peloton back. The company reiterated investments in developing U.S.-based supply chains and its recent acquisition of Precor Fitness to speed up delivery times.
“Our acquisition of Precor will allow us to produce Peloton products here in the U.S. and fast-track our ability to build a large domestic manufacturing footprint over time,” Foley said.
Peloton News: Acquisitions And Competitors
For Peloton, that world-class content includes new acquisitions, artist collaborations and class offerings.
PTON stock soared more than 12% on Dec. 22 after Peloton announced the acquisition of fitness equipment maker Precor. The $420 million deal will bolster Peloton’s manufacturing capabilities and will accelerate production and delivery windows for its popular workout machines.
In November, shares also got a boost when Peloton announced a partnership with recording artist Beyonce. The partnership will culminate with themed workout classes and donations of Peloton digital memberships to students of historically Black colleges and Universities. December also saw the launch of the highly requested Pilates vertical of the Peloton digital studio.
But Apple (AAPL) is looking to step in as a viable competitor in the digital fitness space with Apple Fitness Plus. The subscription fitness app from Apple launched on Dec. 14 and includes recorded classes that can be accessed through Apple products. However, subscribers must own the Apple Watch.
“We’re excited for Apple Fitness+ to bring together the metrics from Apple Watch, great music, and a diverse and inspiring trainer team — in a uniquely simple, easy-to-access way across Apple devices,” Apple’s senior director of fitness Jay Blahnik said in a company news release on the new platform.
Pelton Stock Fundamental Analysis
To determine whether Peloton stock is a buy now, fundamental and technical analysis is key.
The IBD Stock Checkup tool shows that PTON stock has an IBD Composite Rating of 92 out of a best-possible 99. The rating measures a stock based on the most important fundamental and technical stock-picking criteria. IBD research shows that some of the greatest stock winners of all time often have a Composite Rating of at least 95 near the start of big runs.
The Composite Rating looks at earnings and sales growth, profit margins, return on equity and relative stock price performance, among other metrics.
Another positive sign? Peloton stock boasts a Relative Strength score in the high 90s. Stocks with scores above 95 for both Composite and RS are typically in the strike zone for growth investors.
Peloton stock has an EPS Rating of 74 out of 99. The EPS rating compares a stock’s quarterly and annual earnings-per-share growth with that of all other stocks. Relatively recent IPOs typically don’t have a long track record of earnings growth — or profitability. But Peloton’s profits are expected to more than double in 2021.
The fitness platform and equipment maker ranks in the top spot in the Leisure-Services group in terms of Composite Rating. RCI Holdings (RICK) holds the No. 2 slot. Warner Music Group (WMG) is ranked third.
And the group currently ranks No. 41 out of the 197 industry groups IBD tracks. This puts the sector in the top quartile of IBD’s groups, a bullish signal of industry group strength.
PTON Stock Technical Analysis
Peloton stock made its Nasdaq debut on Sept. 2019 at 29 a share. Shares quickly formed a cup-with-handle base and ran up more that 80% from the bottom of that base to hit a peak of 37.02 in December 2019.
Peloton stock then receded from those highs, hitting a low of 17.70 in March 2020 – the bottom of the coronavirus stock market crash. Bolstered by the stay-at-home orders and gym closures, Peloton stock began to skyrocket. Shares consistently held the 21-day moving average as Peloton surged to a 139.75 high by mid-October, a gain of nearly 700% from its March lows.
Peloton stock then began building a base as it broke below its 50-day moving average on positive coronavirus vaccine news last November. But Peloton stock quickly rebounded, moving above an early entry on Dec. 14 as it cleared a declining-tops trend line.
On Dec. 18, Peloton stock broke out of a base with a 139.85 buy point. But it has pulled back from recent highs. Investors who initiated positions at the early entry point on Dec. 14 have some cushion and should keep an eye on how Peloton stock acts around its 10-week moving average.
Those who bought at the 139.85 buy point may want to consider their sell rules. Peloton stock has essentially round-tripped from its buy point, erasing double-digit gains.
Now, the stock is trading beneath its 21-day line and hitting some resistance at the 150 price level.
Peloton Stock: A Buy Right Now?
The long-term outlook for Peloton remains compelling as Covid-19 closures look to bolster business for the immediate future — especially if the company can find solutions to its supply issues. Forward-looking earnings estimates are encouraging.
Bottom line: Peloton stock has pulled back to its 50-day line despite strong earnings. Those interested in Peloton should add the stock to their watchlists, because a strong rebound off the 50-day could provide investors a chance to add shares to their existing positions or even initiate a new one. That’s because IBD’s research shows the first pullback to the 50-day line after a breakout from a base is an optimal place to get in.
Follow Alexis Garcia on Twitter at @IBD_Alexis.
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