Peloton Swings to Q1 Profit as Revenue Triples, but Stock Falls on Supply Issues

Peloton, the connected-fitness company, swung to a fiscal-first-quarter profit from a year-earlier loss but indicated it will face supply issues 'for the foreseeable future' as a result of the pandemic.

Peloton,  (PTON) - Get Report the connected-fitness company, swung to fiscal-first-quarter net income from a year-earlier loss as revenue more than tripled.

For the quarter ended Sept. 30, the New York company reported net income of 20 cents a share compared with a loss of $1.29 a share in the year-earlier quarter. Revenue reached $757.9 million from $228 million.

A survey of analysts by FactSet produced consensus estimates of GAAP earnings of 11 cents a share on revenue of $735.2 million.

However, Peloton said it will be “operating under supply constraints for the foreseeable future" given the unprecedented pandemic-driven demand for its products and that this would continue "for the foreseeable future." 

"As we rapidly scale our organization to meet the extraordinary demand for our products, we realize that some of our Members have faced extended delays associated with receiving our products or having support requests fulfilled," the company said in a note to shareholders. 

Peloton shares were trading down 5.8% to $119.30 in after-hours trading on Thursday. They closed regular trading on Thursday up 6.8% to $126.63. The stock has more than quadrupled this year.

The company said it expects fiscal second-quarter revenue of $1 billion, compared with the consensus analyst estimate of $935.7 million, according to FactSet.

Connected fitness subscriptions in fiscal Q1 more than doubled to more than 1.33 million, while paid digital subscriptions more than quadrupled to more than 510,000.

Peloton on Oct. 27 received high marks from analysts at KeyBanc when it unveiled a promotion with JPMorgan Chase  (JPM) - Get Report. Peloton plans a Chase Sapphire Reserve credit card that will receive $120 in statement credits toward eligible Peloton memberships. 

A week earlier, Keybanc analyst Edward Yruma had raised his price target on Peloton to $160.

Also in late October, Goldman Sachs analyst Heath Terry cut his rating on Peloton to neutral from buy on valuation, Barron’s reported. Terry raised his price target to $140 from $138.

A year ago, he added the stock to Goldman’s Americas Buy List, pointing to potential upside for the stock, according to Barron’s. When the pandemic hit this year, gyms closed and everyone, including fitness enthusiasts, stayed home.

In mid-October, Bank of America Securities analyst Justin Post raised his price target for the stock to $150 while affirming a buy rating. Meanwhile, Baird analyst Jonathan Komp raised his target to $140 from $120, and Truist’s Youssef Squali raised his target to $144 from $115.