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Peloton skyrockets after the earnings report, touches 8-mth highs

The company's stock price could continue higher, especially if the buyout rumours turned out to be true.

Shares of the fitness company Peloton rocketed nearly 20% higher on Wednesday as the firm announced optimistic earnings results.

Smaller loss, better guidance

Peloton stated that its adjusted loss for the three months ending in December, the company’s second fiscal quarter, was 98 cents per share, which was much higher than Wall Street’s consensus estimate of 64 cents per share but lower than the previous year’s loss of $1.36 per share.

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As Peloton reported, Group revenues decreased 29.8% year-over-year to $792.7 million but surpassed analysts’ expectations of $710.5 million. Connected fitness items generated $381,4 million in revenue during the second quarter, while subscriptions generated $411,3 million. For the third straight quarter, subscription revenue has exceeded unit sales.

The corporation stated in a news release that this trend is gross margin accretive since gross subscription margins greatly surpass hardware gross margins. If this trend continues, which seems plausible given that they sell more hardware in Q2 than in any other quarter of the fiscal year, it implies a fundamental change toward an improvement in the business’s gross margins.

Peloton forecasts revenue for the third quarter of its fiscal year to be between $690 million and $715 million, which is down from the second quarter due to the conclusion of the holiday season and fewer promotions. In addition, Peloton stated that it expects the present macroeconomic situation to continue negatively impacting customers and that “near-term demand for connected fitness technology is anticipated to remain weak.”

“If you’ve been wondering whether or not Peloton can make an epic comeback, this quarter’s results show the changes we’re making are working,” said CEO Barry McCarthy in a letter to investors.

New buyers for the company soon?

According to recent rumors, Amazon and Nike are interested in acquiring the at-home exercise startup Peloton. Peloton’s stock price increased by 22% at the start of the following week after these stories were made public.

Reuters reported that a source disclosed Amazon and Nike’s interest in acquiring Peloton. Though neither firm has yet undertaken official discussions with Peloton.

At the onset of the epidemic, when individuals began seeking alternatives to their regular training schedule, Peloton became a significant hit. In addition, due to the lockdown that caused gyms to close, Peloton became an in-demand supplement to maintain fitness routines.

According to the Wall Street Journal, if Amazon were to complete the acquisition, the internet corporation would have better access to user data, which would aid future health and wellness projects.

It looks like the $8 support has been defended, and the stock price could continue in its rally, especially if today’s FOMC meeting comes out dovish.

Peloton daily chart

Peloton daily chart, source: author´s analysis, tradingview.com

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