Is Peloton a buy?

It’s time to update one of the most popular stay at home names in the market. Here is the breakdown on $PTON, otherwise known as Peloton.

Current Price: $118.80

52/Wk High: $139.75

52/Wk Low: $17.70

Market Cap: $34.9 billion

Read below for the breakdown!

Peloton, one of the most popular stay-at-home names is a provider of a digital fitness platform that not only provides the digital experience but most importantly the Bike and Tread itself. 

Due to COVID-19 gyms across the country have been shut down, leading many to purchase Pelotons bikes and join the companies digital ecosystem. 

Digging into Pelotons numbers you couldn’t ask for better growth. According to the Motley Fool Peloton has reached 1.1 million Connected Fitness subscribers in just six short years. 

Based on the fact that there are over 183 million gym memberships on a global basis, it is safe to say that Peloton has plenty of room to grow. 

With growth only boosted by the world’s digital transformation in the past few months, Peloton has seen massive growth.

Taking a look at the most recent quarterly report, Q4 2020, Peloton delivered big time. Peloton reported a Q4 EPS of $0.27 beating the expected EPS consensus estimate of $0.10.

Furthermore, Peloton reported stellar revenue growth, reporting total revenues of $607.1 million, representing 172% growth year-over-year. Not only that but Peloton also reported Q4 Net Income of $89.1 million.

On the year, Peloton reported revenue growth of 100% bringing the companies total revenues on the year to $1.8 billion. 

Peloton also delivered solid Q1 2021 guidance. Management expects Q1 revenues of $720 million to $730 million representing 218% growth at the midpoint. 

Moving into the financial standing of Peloton, the balance sheet is excellent as of Q4;

Total Debt: $0

Total Liabilities: $1.304 billion

Total Assets: $2.982 billion

Cash and Short Term Inv: $1.755 billion

Based on Peloton’s current levels, the company is financially well and with continued growth, it should only improve. 

Taking a look at the pricing of the stock itself Peloton is currently quite expensive relative to earnings;

Price to Sales: 19.65x

Price to Book: 21.34x

Price to Cash Flow: 88.58x

Overall the stock itself is quite expensive but given the future potential growth of the company it could be worth paying up for.

Although numbers are solid across the board the analysts remain mixed. Currently, the mean price target sits at $120.86/share, representing a minimal 0.0497% gain.

On the otherhand, the high price target is $160.00/share, representing a 32.45% upside while the low price target is $33.00/share, representing a -72.68% loss. 

The big money is just as mixed as the analysts. Currently, 69.02% of Peloton is owned by institutions. Top holders include Baillie Gifford & Company, Fidelity Management & Research, and The Vanguard Group.

When it comes to the technicals Peloton has gone on a massive run and could soon present an opportunity according to the six-month charts. The six-month MACD recently diverged to the downside creating a downward momentum range of 10.84 down to 9.15.

Moving further into the technicals, the six-month RSI is trending down and currently sits at 55.49 while the CCI sits at 7.31. Finally, it is important to note that Peloton currently trades roughly 20 points off its highs.

In short, Peloton presents huge growth in the near and long term. On the otherhand, given how far the stock has run on the year I recommend scaling into the stock, purchasing portions of a position as it pulls back, or waiting for a larger pullback opportunity.

Finally, I like the stock in the mid to long-term timeframe and expect outsized gains if Peloton can deliver on its Q1 guidance.

EAT - SLEEP - PROFIT

Disclaimer: This is not direct financial advice, simply an opinion based on independent research.

Photo Credit: Picture by Tony Webster