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Peloton climbs 6% as tripled quarterly sales outweigh delivery issues, prompting a flurry of stock upgrades

Ben Winck   

Peloton climbs 6% as tripled quarterly sales outweigh delivery issues, prompting a flurry of stock upgrades
  • Peloton surged as much as 6% on Friday as massive sales growth offset concerns over supply constraints.
  • The company beat estimates for its fiscal first-quarter earnings and revenue, with the latter more than tripling from the year-ago reading.
  • Peloton also lifted its forecast for full-year sales above analyst expectations.
  • The previous quarter's strong demand has given way to "unacceptably long" wait times for bikes, CEO John Foley said in a call with analysts, noting the company will invest in faster shipping and more manufacturing capacity.
  • The product shortage is "a good problem to have," JPMorgan said in a note. The bank joined others in praising Peloton's earnings results and lifted its price target to $145 from $125.
  • Watch Peloton trade live here.

Peloton erased early morning losses and soared as much as 6% on Friday as titanic sales growth overshadowed supply-chain issues.

The exercise equipment company thrived through the coronavirus pandemic as stay-at-home activity drove people to its premium bike and treadmill products. The surge in demand materialized on Thursday afternoon when Peloton reported fiscal first-quarter sales growth of 232%, surpassing both internal and Wall Street expectations.

Peloton also lifted its annual revenue guidance to $3.9 million from a previous peak of $3.65 million. Fourth-quarter sales will land at $1 billion, according to Peloton, above the $932.2 million expected by analysts.

Here are the key numbers compared to estimates compiled by Bloomberg:

  • Revenue: $757.9 million, versus the $734.5 million estimate and up 232% year-over-year
  • Earnings per share: 20 cents, versus the 13 cents estimate and up from a $1.29 per share loss in the year-ago period
  • Fitness subscriptions: 1.33 million, up 138% year-to-date.

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Still, Thursday's report and subsequent analyst call had its fair share of warnings. The surging demand for Peloton's hardware is now fueling product shortages and shipping constraints, according to the firm.

"Wait times for our products have been unacceptably long," CEO John Foley said in the earnings call, adding "it will take a bit more time" to solve the supply issues. Peloton plans to scale up its customer support team, boost manufacturing capabilities, and invest in faster shipping to improve wait times, Foley said.

Wall Street largely looked past the shipping problems and praised the company's massive first-quarter expansion. JPMorgan lifted its target price for Peloton shares to $145 from $125, deeming the long wait times "a good problem to have." Investors should buy any dip, analyst Doug Anmuth added. The new price target implies a 15% climb from Thursday's closing level.

KeyBanc reiterated its "overweight" rating for Peloton stock, calling the stock one of its favorite growth picks. Though demand will continue to outpace manufacturing and customer service capacity, the company's planned improvements should alleviate the short-term pressures, the firm added.

Peloton traded at $128.27 per share as of 11:25 a.m. ET Friday, up 362% year-to-date. The company has 43 "buy" ratings, three "hold" ratings, and one "sell" rating from analysts.

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