Peloton’s red-hot earnings show at-home demand here to stay

Peloton Interactive Inc. shares rose to another record high after third- quarter results and a boosted yearend forecast blew away Wall Street’s estimates, indicating that strong demand for its exercise products is here to stay.

The coronavirus pandemic contributed to growth in the quarter as fitness centres were ordered to close and consumers turned to at- home physical activities. This shift in behaviour was widely touted by Wall Street over recent months, but analysts still underestimated the degree of heightened demand. Connected fitness subscribers rose to 886,100 at quarter end, topping expectations for 858,000, which reflects an average of five estimates compiled by Bloomberg News.

“Fiscal third- quarter results reinforce our thesis that consumer behaviour is fundamentally changing due to COVID-19 and that Peloton is benefiting from this shift as demand accelerates,” said JMP analyst Ronald Josey. Even BMO’S Simeon Siegel, who holds the lone sell-equivalent rating on the stock, couldn’t ignore the beat- and- raise results and called the earnings update “great.”

Peloton isn’ t just a COVID-19 story, said Wedbush analyst James Hardiman, noting that the company was on a “promising trajectory” before the virus outbreak. Hardiman does not believe the boost in customers was “merely demand being pulled forward from future periods,” with brand awareness and interest for Peloton soaring over the past year. He has a buy- equivalent rating on the stock, and boosted his 12- month price target to US$50 from US$40.

Shares climbed as much as 20 per cent to US$ 45.70, easily surpassing the former intraday record high of US$ 39.26. Even before Thursday’s trading, the New York-based company’s 19-percent rally leading up to its results had it on pace for the best week since November.