Peloton reports third quarter earnings with strong numbers and record high delivery times – The Average Joe

    Peloton reports third quarter earnings with strong numbers and record high delivery times

    Victor Lei — Head of Research

    November 17, 2020

    November 17, 2020

    If you’re lucky, your Peloton bike could arrive just in time for Christmas… of next year. In the third quarter of 2020, Peloton reported strong revenue growth, subscriber growth and record delivery wait times.

    Peloton popularized at-home spin classes through their premium exercise bikes. Using a screen attached to the bike, bikers can join a virtual spin-class with a Peloton subscription. First launched in 2012 through a Kickstarter campaign, the company has since grown into a $36b giant.

    Numbers — up and to the right 📈

    Peloton has become one of the hottest stocks to benefit from COVID shutdown, its stock has grown more than 4x since the beginning of the pandemic.

    On Nov. 5, Peloton released their third-quarter results with numbers that would top the bike’s leaderboard.

    • Third-quarter revenue tripled to $757.9m from a year ago.
    • Fitness subscriptions more than doubled to 1.33m.
    • Net income increased to $69.3m, compared to the same period last year where it lost $49.8m.
    • Time spent waiting for your Peloton delivery — up to 5 weeks.

    First world business problems

    Peloton’s first world business problems — too many orders for it to handle. Supply chain disruptions caused by COVID created product shortages but Peloton’s got a first-world solution — throwing money at the problem:

    • Improve shipping by upgrading to faster air service
    • Increase production capacity by opening additional manufacturing facilities
    • Grow customer service team to reduce call wait times

    All this will lead to higher expenses for Peloton, whose supply chain issues are expected to run well into 2021.

    For investors… Peloton will need to pedal faster

    In Oct., Goldman Sachs downgraded Peloton’s stock, suggesting that “much of the near term opportunity is priced in”. — meaning… The current price of the stock already anticipates the growth in the business.

    However, JPMorgan analyst Doug Anmuth had a different opinion. He believes that too much demand isn’t the worst problem to have and current problems could be temporary.

    If Peloton wants to continue its current trajectory, it’ll have to continue beating growth expectations even when gyms open back up.

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