Peloton Reports Strong Q2 Growth, Ramps up Manufacturing Plans Amid Delivery Delays

By Adriaan Brits Friday, February 5, 2021

Peloton, the largest interactive fitness company in the world, reported stronger-than-expected Q2 results.

A bag of money on top of wooden blocks that say "2021."

Supply Constraints Send Shares Lower

The fitness business reported it earned $0.18 per share to top the $0.10 expected from market analysts. Business revenue came in at $1.06 billion, which is again higher than the $1.03 billion the Street expected.

Closely-watched metrics in the fitness business, namely the number of fitness subscriptions, rose 134% to 1.67 million. Similarly, the company reported it now has 625,000 paid digital subscribers.

As for the forward-looking guidance, the business that offers connected fitness solutions said it forecasts revenues of $1.1 billion for the ongoing quarter and a full-year revenue of $4 billion.

“We continued to see robust demand for our connected fitness platform through the Holiday selling season, and Member engagement gains continue to validate our hardware, software, and content investments,” the company said in a statement.

However, it took note of the supply chain constraints that have resulted in delivery delays, with some customers reporting delays of several weeks or even months.

“The ongoing COVID-19 pandemic continues to present a challenging operating landscape, and we continue to work to address long order-to-delivery timeframes. However, our supply chain investments over the last several months are helping us better match our supply and demand going forward,” the company added in the statement.

Analysts seem concerned that the fitness business is struggling to process the high number of orders.

“We’re finding that Peloton the idea has grown faster than Peloton the company. All companies need to figure out how to grow into their hype. Right now, the hype surrounding Peloton is like no other,” BMO Capital Markets analyst Simeon Siegel said.

Despite the company topping Q2 estimates, the Peloton stock is trading about 7% lower in pre-open Friday amid fears of prolonged delivery delays. The fact that investment firm Raymond James downgraded the stock to “Market Perform” from “Outperform” didn’t help either.

“We lower our rating on Peloton shares to Market Perform following 2Q results as 1) we believe risk/reward is less favorable at current levels (26x/21x our CY21/22 gross profits); 2) while demand remains strong, we believe trends could soften somewhat in 2H21 with social distancing measures likely to ease given the vaccine rollout,” their analyst Aaron Kessler said in today’s note.

Summary

The interactive fitness business Peloton reported strong growth for its Q2, with revenues exceeding $1 billion for the first time. However, the fitness business reported supply chain constraints that are resulting in delivery delays and weaker investors’ confidence in Peloton stock.

About the Author


Headshot for author Adriaan Brits
As an analyst of global affairs, Adriaan has an MSC from Oxford, with diverse interests in the digital economy, entertainment, and business. He is a specialist trainer in Advanced Analytics & Media.

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