Uncertain prospects for Peloton's share price despite high sales

At $106.59 on 23 August, Peloton [PTON] was trading 29.7% lower compared to $151.72 at the beginning of 2021. However, the maker of interactive fitness equipment has done well compared its close at $66.87 on 24 August 2020. It has moved between a low of $65.29 and a high of $171.09 over the past 52 weeks.

The stock is trading significant lower than its 50-day moving average of $116.87. It performed a lot better hovering above $150 on most days between 22 December and 26 January, touching the 52-week high on January 14 when COVID lockdowns were being enforced ardently in US and Europe.

AMC share price’s box office run

The AMC share price has had a remarkable ride so far this year, rising 1,987.7% – and rebounding from a record low of $1.91 on 5 January – to $44.26 at the close on 24 August. That doesn’t tell the whole story though, with the shares zooming to $72.62 at one point in June, after AMC was swept up in the short squeeze mania, which saw GameStop [GME] soar higher in January. Even though AMC’s share price has pulled back to above the $40 mark, it’s still up 718.1% in the past 12-months.

As of 23 August, Peloton has a price to earnings ratio for the trailing 12 months of 165.26 and market cap of $31.80bn. The company is due to release its earnings report on August 26.

Deepening losses

A consensus of 23 analysts on Yahoo Finance estimate Peloton’s loss per share at $0.44 for the quarter ending June and loss of $0.1 per share for the full year. Zacks’ consensus estimate is similar It says Peloton is expected to post a quarterly loss of $0.45 per share. But revenues are expected to be $925.4m, up 52.4% from the year-ago quarter. As such the company’s loss in the quarter is likely to deepen by 42%.

The company’s revenue guidance for full-year stands at $3.5bn-$3.65bn. A consensus of 25 analysts peg annual revenue at $4.01bn on Yahoo Finance.

Navigating a difficult year

Peloton was forced to withdraw its Tread+ treadmill product earlier this year after there were several reports of injuries and the US Consumer Safety Protection Commission asked it to address safety issues. Peloton CFO Jill Woodworth estimated the total damages at $165m.

As the stock price slid in early May, it was trading at a forward price-to-sales ratio of 6.3. It was double that at the start of the year, as reported by The Motley Fool.

The company has a high level of debt with debt-to-equity ratio 41.2%. But this is pretty well covered by operating cash flow which is 83.6% of the debt. The coverage of interest payments is not a concern for Peloton as it earns more interest than it pays, according to analysis on website Simply Wall St. In its disclosures for the quarter ending on March 30, the company has cash and cash equivalents of $2.69bn.

Peloton announced in May that it is investing $400m into its first US factory in Ohio to solve supply chain issues.

On investors.com, Alexis Garcia wrote: ‘Bottom line: Peloton stock is not a buy right now. The stock still needs to prove itself, with shares roughly 34% below all-time highs. Earnings in late August potentially could be the catalyst this stock needs to break its downtrend.’

Q3 Report

Peloton follows a financial year from July to June, making the quarter it will be reporting the last for the year.

In a letter to investors after its last earnings report, the company said, “Average wait times for our original Bike are now back to pre-COVID-19 levels. While progress has been made, additional work remains to reduce delivery times across the remainder of our product portfolio and regions.” As part of its investments in its supply chain, the company completed an acquisition in April, which could reflect in the number to be posted on Aug 26.

The top three owners of Peloton stock are The Vanguard Group with 8.09%, Baillie Gifford & Co with 7.54%, and Capital Research & Management Co with 4.65%.

A total of 17.9 million shares of Peloton are held by 135 US-traded ETFs. Leading the group is Invesco QQQ Trust [QQQ], with 3.47 million shares.