August 25 (Reuters) – The investors at Peloton Interactive Inc (PTON.O) want answers to two questions when the company releases the results on Thursday: Will the delta coronavirus variant trigger a new surge in sales and are customers ready to look past a recall? the manufacturers of exercise bikes and treadmills?
When it comes to COVID, most analysts say it’s too early to predict whether the stay-at-home stock will get another pandemic-induced boost, as vaccines could increase confidence to leave the house to go to the gym work out. The launch of its new treadmill in the US next week comes at an opportune time.
Whether due to Delta or delays in getting back to the office, use of independent gyms declined 8% compared to pre-pandemic levels, while interest in digital workouts and home equipment increased 21%, according to consulting firm ClubIntel.
“If the Delta variant continues to delay the return to normal – and worse, if it leads to gradual gym closings in winter – it could be a positive catalyst for Peloton,” said James Hardiman of Wedbush Securities. He added that it is “far too early to make that assessment now”. He downgraded Peloton stock from Outperform to Neutral on July 14 due to uncertain future demand. The stock is down 34% from its January 14 high.
Cowen analyst John Blackledge maintains an outperformance rating and notes a survey suggesting that consumer attitudes toward gym return worsened in July amid the surge in the Delta variant, which could fuel short-term demand.
According to analysts, the new treadmill from Peloton is the key to the next sales growth and an expensive recall of its exercise equipment for safety reasons. Continue reading
Peloton’s shares fell more than 15% in May after the company recalled its Tread + treadmill. Peloton initially resold the Tread + despite multiple injuries and the death of a child pulled under the machine in March.
The cheaper tread will hit the US market for $ 2,495. It had been launched in Canada and the UK but was recalled in May due to a manufacturing issue. Peloton announced it will begin selling the Tread in the United States and the United Kingdom on August 30, and later this fall in Germany. The release comes after Peloton found a solution to faulty screws that caused the Tread’s touchscreen console to fall off. Continue reading
“The success of Tread could be a turning point as Peloton has so far relied on the popularity of its Bike and Bike + products while treadmills as a category represent a larger market,” added Blackledge.
Peloton is expected to report revenue of $ 922 million for the fourth quarter ended June 30, an increase of 52% year over year, based on average analyst estimates based on refinitive data. A loss of $ 137.9 million, or 45 cents per share, was expected on net income, compared to a profit of $ 89.1 million, or 27 cents per share, last year.
The stock lost 0.5% on Wednesday morning.
Although Peloton has suffered some supply chain challenges lately, it may be poised to handle a potential surge in demand after investing $ 100 million to expedite overseas and air shipping from its Taiwan manufacturing facility. The company is also expected to benefit from the acquisition of equipment maker Precor and is currently building a new manufacturing facility in Ohio, which will open in 2023. read more
The company is also expected to announce plans to continue international expansion after entering the Australian market in July. According to Loop Capital analyst Daniel Adam, Peloton is scratching the surface of its potential customer base of around 5.4 million Peloton members and 2 million Connected Fitness subscribers who pay monthly fees to watch the company’s video workouts benefit and equipment.
According to the International Health, Racquet and Sportsclub Association (IHRSA), the global fitness industry was worth $ 96.7 billion in 2020, with a total of more than 184 million gym members.
In June, Peloton announced that it would sell three times more units in the quarter that ended June 30th than in the same period in 2019.
“We believe there is a huge opportunity ahead of us,” said Jill Woodworth, Peloton’s chief financial officer, at an investor conference in early June.
Reporting by Joyce Philippe in New York; Editing by Lisa Shumaker
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