Benzinga | Feb 5, 2021 10:43AM EST

Peloton Pedals To Record Revenue But Fails To Wow Investors

On Thursday, internet-connected fitness equipment maker Peloton Interactive Inc (NASDAQ:PTON) revealed its quarterly sales topped $1 billion for the very first time, although the company warned that profitability might be dampened due to supply chain investment to combat product delays. The stock went down nearly 8% as the group struggled to deliver its flagship bike and treadmill products.

The Army Of Pedaling Enthusiasts

In the three months since the world's largest connected fitness platform reported its prior earnings, it bought a competitor, launched a new treadmill, addressed its shipping delays and announced plans to repair its damaged customer experience. However, even with these growing pains, over the last three months, Peloton's stock has nearly doubled the gains posted by the NASDAQ to which it was added last month. In a year, Peloton's shares skyrocketed about 365% with its market cap now being approximately $46 billion.

Figures

The connected spinning bike pioneer said revenues last quarter grew 128% to $1.06 billion, exceeding the $1.03 billion forecast. Its first billion quarter produced a net profit of $63.6 million which is its third quarterly profit in a row compared to a loss of $55.4 million it suffered exactly one year ago.

The World Is Getting In Shape

It's not like exercise bikes are some new niche, but for the high-end workout enthusiast with sufficient disposable income, the Peloton experience continues to dominate the space of the home-fitness hyper-growth story with 1.67 million connected subscribers using its bikes and treadmills. This is a YoY growth rate of 134%, whereas its no-equipment-necessary "Peloton Digital" subscriptions had risen 472% to 625,000. As a good indicator of its future success, Peloton's retention rates also remain strong as average net monthly connected fitness churn was 0.76%, even better the previous quarter's 0.65%. The lower the churn rate, the less turnover Peloton is seeing with its user base which is great news in the increasingly competitive field with companies such as Lululemon Athletica Inc-owned (NASDAQ:LULU) Mirror also making high-end workouts as a service-based subscription.

Peloton Is Expected To Stay In Shape

Peloton pledged it would spend $100 million on air freight and expedited ocean freight to improve its "longer than acceptable wait times" over the next half of the year. It declared that improving member experience is its number one priority and it did buy Precor in December for $420 million, adding manufacturing capacity for its products. The company expects "slow but steady" progress for the remainder of the fiscal year. As it continues to see strong demand, its earnings outlook for fiscal 2021 remains unchanged.

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