Aug. 25 (Reuters) – Investors in Peloton Interactive Inc (PTON.O) want two questions answered when the company releases its results on Thursday: Will the Delta coronavirus variant lead to a further increase in sales and customers are ready to look beyond a recall by the manufacturers of exercise bikes and treadmills?
When it comes to COVID, most analysts say it’s too early to predict whether home stock will receive another pandemic-fueled boost as vaccines could boost confidence to leave home to train in gyms. The launch of its new treadmill in the United States next week is timely.
Whether due to Delta or delays in returning workers to the office, use of independent gyms has declined 8% from pre-pandemic levels, while interest in digital workouts and household equipment rose 21%, according to consulting firm ClubIntel.
“If the Delta variant continues to delay the return to normal – and worse yet, if it results in gradual gym closures in the winter – I think that could be a positive catalyst for Peloton,” said James Hardiman of Wedbush Securities. He added that “it is far too early to make this assessment now”. He downgraded Peloton’s rating from outperformance to neutral on July 14 due in part to uncertain future demand. The stock is down 34% from its January 14 high.
Cowen analyst John Blackledge maintains an outperformance rating, noting a survey that suggests consumer attitudes toward returning to gyms worsened in July given the surge in the gym. Delta variant, which could stimulate demand in the short term.
Peloton’s new treadmill is the key to its next step in potential sales growth, analysts say, and warrants an expensive recall of its exercise machines for safety reasons. Read more
Peloton’s shares fell more than 15% in May after its Tread + treadmill was recalled. Peloton initially continued to sell the Tread + despite multiple injuries and the death of a child in March after being pulled under the machine.
The cheaper tread will debut in the US for $ 2,495. It had been launched in Canada and the UK but was recalled in May for a manufacturing issue. Peloton has announced that it will be released in the US on August 30 after finding a fix for the faulty screws that knocked the touchscreen console off the tread. Read more
“The success of Tread could mark an inflection point, as Peloton has so far built on the popularity of its Bike and Bike + products, while treadmills as a category represent a larger market,” Blackledge added.
Peloton is expected to report revenue of $ 922 million for the fourth quarter ended June 30, up 52% from a year ago, according to an average of analyst estimates based on Refinitiv data. Net income is expected to be a loss of $ 137.9 million or 45 cents per share, compared with earnings of $ 89.1 million or 27 cents per share a year earlier.
Although Peloton has recently faced supply chain issues, it may be able to handle a potential surge in demand after investing $ 100 million to speed up air and overseas travel from its manufacturing facility. in Taiwan. The company is also expected to capitalize on its acquisition of OEM Precor and is currently building a new production facility in Ohio, which will open in 2023. read more
The company is also expected to announce plans to continue its international expansion after entering the Australian market in July. According to Loop Capital analyst David Adam, Peloton is only scratching the surface of its potential customer base, with around 5.4 million Peloton members in total and 2 million “connected fitness” subscribers paying monthly fees. to use the company video workouts and equipment.
In 2020, the global gym industry was worth $ 96.7 billion with more than 184 million members in total, according to the International Health, Racquet and Sportsclub Association (IHRSA).
In June, Peloton said it expected to sell three times as many units in the quarter, which ended June 30, than during the same period in 2019.
“We believe there is a huge opportunity ahead of us,” Peloton CFO Jill Woodworth said at an investor conference in early June.
Report by Joyce Philippe in New York; Editing by Lisa Shumaker
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