Interactive exercise equipment manufacturer platoon (NASDAQ: PTON) is expected to release its fourth quarter results on Thursday, August 26. In 2020, the company was a major beneficiary of economic lockdowns as fitness centers were forced to temporarily shut down at various times and people sought other exercise options.
As economies reopen and consumers have more options to exercise, there are concerns that this will negatively affect Peloton’s sales. Yet reopening economies does not mean the risk of contracting COVID-19 is gone. The rise of the delta variant keeps this risk around. It could also prevent some people from returning to the gyms.
Get back on track
Reopening trends will certainly be a priority for shareholders reviewing the company’s fourth quarter report. However, this is not the only question of importance. In its fiscal third quarter report, Peloton management said it would begin manufacturing products at its newly acquired facilities by the end of the fourth quarter. Material supply shipping issues were a barrier for Peloton as it struggled with not producing enough product to meet demand and getting its products to where they needed to be. Peloton bought the manufacturing company Precor, in part, to help solve these problems.
Peloton’s primary market is the United States and Precor’s facilities are located in North Carolina. If it can start ramping up production from these facilities, it could alleviate the high costs the company currently faces in getting its products into the United States from its overseas suppliers. New facilities in the country can also reduce production costs, which management can use to increase profits or reduce prices charged to consumers.
Customer demand for Peloton products was on fire even before the pandemic. The company doubled its annual revenue in 2018 and 2019 before doubling again in 2020 during the pandemic. Peloton achieved annual sales of $ 219 million in 2017; that number reached $ 1.8 billion in 2020. For this reason, it is not clear that Peloton’s sales growth will slow as the economies reopen.
Those interested in Peloton will also want to hear from management discuss the progress made on adjustments to the Tread and Tread + products. The company had to recall the treadmills shortly after it started selling them due to injuries involving young children.
What this could mean for investors
Wall Street analysts expect Peloton to report fourth quarter revenue of $ 921 million and loss per share of $ 0.44. If it meets the estimates, revenue would be 51.8% higher than the same quarter last year. It will also be the slowest quarterly growth, going back at least seven quarters. This is understandable given the figure compared to the fiscal fourth quarter of last year, when Peloton increased its turnover by 174%.
The stock is trading at a futures price-to-sell ratio of 6, having fallen from a high of around 12 earlier in the year. The pessimism surrounding reopening trends and the unhappiness of recalls already seem to be factored into the stock, as it is trading almost 37% from highs set towards the end of 2020. Investors interested in the stock purchase of Peloton shares and decide whether to buy before or after the earnings are released should make the purchase before. However, splitting your buy in half and buying half of your allocation before and half after the earnings release might be a less risky way to acquire stocks in this case.
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