Is Peloton a buy at all time highs?

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: $162.41

52/Wk High: $166.23

52/Wk Low: $17.70


Market Cap: $47.5 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.


In recent news, Peloton announced the acquisition of Precor, a fitness equipment company for a whopping $420 million.


By combining our talented and committed R&D and Supply Chain teams with the incredibly capable Precor team and their decades of experience, we believe we will be able to lead the global connected fitness market in both innovation and scale," President William Lynch said.


Furthermore, the numbers continue to impress and Peloton continues to grow. Peloton beat Q1 expectations, reporting an EPS of $0.20 versus the analyst’s consensus EPS estimate of $0.11.


Peloton went on to report that revenues grew by a huge 232% in Q1, totaling $757.9 million. Management also noted that Connected Fitness Subscriptions grew by 137% to 1.33 million.


It is also important to note that paid Digital Subscriptions grew by 382%, totaling 510,00, which brings the overall members count to 3.6 million.


Digging into the margins, gross margin was 43.4% in Q1, Subscription Gross Margin was 58.5%, Connected Fitness Product gross margin was 39.4%, and Subscription Contribution margin was 64.1%.


Not only that but net income totaled $69.3 million and adjusted EBITDA landed at $118.9 million for the first quarter of 2021.


Peloton went on to deliver Q2 2021 guidance, and now expects revenues to total $1 billion and gross profit margin to land at 39%.

Management also believes that Q2 Connected Fitness Subscriptions will total 1.63 million and that Adjusted EBITDA will be $70 million.


As for FY 2021 management now expects revenues of $3.9 billion, a gross profit margin of 41%, and an adjusted EBITDA of $300 million.


On a final earnings note management expects FY 2021 Connected Fitness Subscriptions to total 2.17 million.


Shifting into the balance sheet the numbers are solid.


Total Debt: None


Total Liabilities: $1.677 Billion


Total Assets: $3.478 Billion


Cash & Short Term Inv: $2.023 Billion


While the numbers are great the valuation has risen to ridiculous levels.


Price to Earnings: 1,203.95x


Price to Sales: 17.93x


Price to Book: 23.40x


Price to Cash Flow: 130.49x


Management on the other hand has done a solid job.


Return on Equity: 2.81%


Return on Assets: 1.61%


Return on Invested Capital: 2.13%


Taking in the numbers the analysts remain mixed with a mean price target of $146.90/share, representing a -10.46% loss.


It is also important to note that the high price target is $185.00/share, representing a 12.76% gain, while the low price target is $110.00/share, representing a -32.95% downside.


As for the big money, the institutions maintain solid involvement with 68.53% of Peloton being owned by institutions. Top holders include The Vanguard Group, Baillie Gifford & Co., and Jennison Associates.


On a technical basis, Peloton is very bullish. According to the six-month charts, the MACD is moving to the upside with strong upward momentum within a range of 9.35 down to 5.00.


The six-month charts are also indicating an RSI of 79.96 and CCI of 247.16, both of which are on the high end.


In short, Peloton is a solid long-term investment but has run too far too fast in my opinion. While it is seeing consistent growth the valuation is outlandish and a favorable entrance would be during a pullback.


An additional risk is the reopening of gyms and normal social life, and whether Peloton can continue to grow at large multiples even with a major change to the market.


EAT - SLEEP - PROFIT


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