Reports Q2 2022 results on Tuesday, February 8, after market close
Income forecast: $1.14 billion
EPS Expectation: -$1.21
Today's earnings release from training product manufacturer Peloton (NASDAQ:) has gained momentum after reports surfaced Friday that U.S. business giants such as Amazon (NASDAQ:), Apple (NASDAQ:) and Nike (NYSE: ), were exploring the acquisition of the interactive fitness platform.
After the news broke on Friday night, the share rose more than 30% in after-hours trading. However, it corrected during Monday's Wall Street session to gain close to 21%, closing at $29.75.
The interest arose after the shares of the New York City-based company — best known for its exercise bikes and remote bicycles — came under heavy selling pressure.
As reopening cooled the pandemic-induced boom in home-based fitness, Peloton's shares fell lower for a year. Wider sell-offs of growth stocks in the market, supply chain disruptions and concerns that revenue and margins are shrinking as customers reduce spending added to the bleak picture, amounting to an 81% loss in market cap.
In its latest report, Peloton said it expects revenue of $4.4 billion to $4.8 billion in fiscal 2022, much lower than the company's $5.4 billion revenue three months earlier. predicted.
Predictions are that the company will report a loss later today that reached $1.21 per share in the fiscal second quarter of 2022.
In a letter to shareholders, Chief Executive Officer John Foley wrote:
"We expected fiscal 2022 to be a very challenging year to predict, given unusual year-ago comparisons, demand uncertainty amid re-opening economies and widely reported supply chain constraints and pressures on raw material costs."
No quick fixes
The challenges Peloton faces may have no quick fix, especially when the economic reopening brings customers to traditional gyms. However, the weakness of PTON's stock offers an attractive entry point for potential investors.
A poll of 30 analysts polled by Investing.com gives a 12-month price target of $47.65 per share, a 60.18% increase for the stock.
Peloton Sense Estimates
Source: Investing.com
However, Friday's Wall Street Journal report, which broke the news that Amazon has been talking to advisers about a potential deal, has left PTON stocks somewhat confused. Analysts have speculated that Apple could also be a potential buyer. And according to the Financial Times, Nike is also considering a separate offer for Peloton.
These reports have helped the stock recover from its deep slump, but some analysts are unsure a deal is imminent. BMO Capital Markets wrote in a note on Sunday:
"You have to ask yourself if the brand is just too small to make a difference to the world's biggest companies."
The analysts wondered if Peloton's roughly 2.8 million subscribers overlapped with Nike, Amazon or Apple. Note from MET added:
"If the world's strongest companies weren't interested when Peloton was projected to grow by 15-100 million subscribers, are they looking to revamp now that engagement/demand has declined?"
Bottom Line
Peloton's earnings report later today is likely to disappoint again as the fitness company struggles to maintain its growth momentum after the pandemic-driven wave has passed.
However, more important information can be provided if management confirms that it is seeking a strategic partnership with a more significant and in-depth buyer. That admission could propel PTON stocks even higher.
