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Peloton: F3Q Gross Subs Can Beat Estimates

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Bank of America: The F3Q gross subs of Peloton can surpass estimates

Justin Post, a Bank of America Analyst believes Peloton could beat its subscribers in fiscal third-quarter.

Street consensus is currently at approximately 235,000 subs, with Post anticipating that PTON will potentially add 250k-265k gross sub-adds.

The total number of visits to Pelotons US sites in Australia, Canada, UK and the UK for F3Q decreased 24% y/y compared to 1% drop in F2Q. However, it continues to outperform competition. Post reported that the Q/Q total visitors increased by 3 percent, while street estimations suggest a large decline in Q/Q gross additions. Lower conversion rates would be expected in F3Q than in F2Q.

Peloton term search were 28% lower YoY than in F2Q, which was worse than the 21% decline. Peloton downloads were also down 49% YoY. This is much more than the 27% decrease in F2Q. Post believes that this indicates that Peloton continues to suffer from the headwinds of reopening.

Post, Net-net and Post continue to support Peloton in a positive light, particularly after Barry McCarthy, the CEO, took office.

Stock price will be driven by sentiment about the new CEO’s comments on changes in business models and possible subscriber growth acceleration. However, there is a risk that Peloton may incur higher upfront costs to increase subscriber growth. There are also risks associated with lower usage metrics for reopening, and seasonal increases in F4Q customer churn. Peloton subscribers and content have strong value in the market. They also offer advantages over peers when it comes to transforming business models under a new CEO. Post said that Barry McCarthy is a great CEO for subscription businesses.

Pre-open Wednesday saw a 1.3% drop in stock of Peloton.

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