Peloton Interactive, Inc (PTON) is a leading producer of interactive fitness products. It operates in three segments – Connected Fitness Products, Subscription Products, and Other. Its connected fitness products include Peloton Bike and Peloton Tread, while its subscription segment comprises on-demand live classes and boutique streaming exercise routines, accessible through the Peloton Digital App.

As more fitness trainers have moved online in response the COVID-19 lockdown regimes, virtual gym classes and live sessions have become the new normal. In response,  PTON has ramped up its digital platform to meet the extraordinary demand for its products. While global  coronavirus vaccine deployment and economic recovery have raised concerns regarding the future of subscription-based products that cater to lockdown lifestyles, the higher productivity rates and comfort afforded by  the remote culture should help PTON maintain its growth momentum in the coming quarters.

PTON’s focus on innovation and continued high global demand for its products have driven it to a 420.7% gain over the past year. This impressive performance combined with several other factors has helped PTON earn a “Strong Buy” rating in our proprietary rating system.

Here is how our proprietary POWR Ratings system evaluates PTON:

Trade Grade: A

PTON is currently trading above its 50-day and 200-day moving averages of $132.13 and $85.73, respectively, indicating that the stock is in an uptrend. Also, the stock has gained 32.2% over the past three months, reflecting solid short-term bullishness.

PTON’s revenue has increased 232% year-over-year to $757.90 million in the fiscal first quarter ended September 30, 2020. Its gross profit rose 213% from the prior-year quarter to $328.70 million. Cash, cash equivalents, and restricted cash flow increased 4% from the year-ago value to $1.43 million over this period.

On December 22, PTON announced that it had signed an agreement to acquire Precor, one of the largest global commercial fitness equipment providers. The acquisition should accelerate PTON’s presence in the commercial market and help it lead the global connected fitness market in both innovation and scale.

Also in December, , the company announced the addition of 103,750 square feet of space to its Peloton Plano Campus. This should allow PTON to bring together key leadership and managerial roles to help it strengthen its customer support and technology expertise in the region.

Buy & Hold Grade: A

In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade considers , PTON is well positioned. The stock is currently trading 6.6% below its 52-week high of $171.09, which it hit on January 14. This can be attributed to the increasing digital subscriptions and the company’s expanded global footprint.

Peer Grade: A

PTON is currently ranked #2 of 62 stocks in the Consumer Goods industry. Other popular stocks in this industry are Chewy, Inc. (CHWY), Avantor, Inc. (AVTR) and The Unilever Group (UL)

UL, AVTR, and CHWY gained 3.4%, 61.1%, and 262.1%, respectively, over the past year. This compares to PTON’s 420.7% returns over this period.

Industry Rank: B

The Consumer Goods industry is ranked #38 out of the 123 StockNews.com industries. The companies in this industry manufacture and sell fitness products, and other branded consumer packaged goods that are used every day.

With countries gradually reopening parts of their economies, consumer behavior is settling into a new normal, as people everywhere have learned to live with the reality of the pandemic. Demand for a large set of categories, including household supplies, personal-care products, fitness equipment, and gasoline has been increasing steadily. With higher direct fiscal stimulus benefits likely to be distributed by the Biden administration, consumer spending is likely to rise in the coming months, boosting this industry’s growth significantly.

Overall POWR Rating: A (Strong Buy)

PTON is rated “Strong Buy” due to its impressive financials, short and long-term bullishness, and underlying industry strength, as determined by the four components of our overall POWR Rating.

Bottom Line

With a rapid growth in fitness subscriptions and the launch of new products, we think PTON  is well positioned to soar in 2021, despite gaining 420.7% over the past year. The company should witness steady demand for its products because the remote lifestyles are   expected to continue.

Analyst sentiment, which gives a good sense of a stock’s future price movement, is good for PTON. It has an average broker rating of 1.42, which indicates favorable analyst sentiment. Of 24 Wall Street analysts that rated the stock, 9 rated it a “Strong Buy.”  A consensus EPS estimate of $0.38 for the current year represents  a 218.8% improvement year-over-year. The consensus revenue estimate of $3.94 billion for 2021 represents a 116% increase from the same period last year.

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PTON shares were trading at $161.81 per share on Monday morning, up $2.06 (+1.29%). Year-to-date, PTON has gained 6.65%, versus a 2.44% rise in the benchmark S&P 500 index during the same period.

About the Author: Imon Ghosh

Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...

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