The Major Catalysts for This
Chain Problems Easing.....
The supply chain woes that have dogged Peloton during the COVID-19 pandemic
are apparently easing, as negative customer comments on the Better Business
Bureau's website are down "significantly."
MKM Partners analyst Rohit Kulkarni says that means the 34% plunge the home
fitness equipment maker's stock has suffered makes Peloton an
"attractive" buying opportunity, though he maintains his $130 per
share price target.
Overwhelming demand for Peloton's connected treadmills and exercise bikes
swamped the equipment maker as consumers began working out at home after gyms
were forced to close during the coronavirus outbreak.
Yet the pandemic upset supply chains across many industries, and Peloton was
unable to source enough equipment from its manufacturers in China. Last quarter
it said congestion at ports had delayed shipments five times longer than usual.
Peloton subsequently expanded its manufacturing capabilities in the U.S. and
also acquired Precor, a fitness equipment maker for the commercial market that
would help it meet existing demand.
Kulkarni says consumer posts on the BBB.org website about the company are
down substantially from when Peloton was telling customers shipment delays
would be months instead of weeks. It suggests the improvements it's made to the
supply chain are having a positive impact.
He is also hopeful about the national rollout of Peloton's new lower-cost
treadmill called Tread, as well as the effect Precor will have on its chances
of entering the market for equipment sold to hotels, gyms, and corporations.
Peloton announced its expansion into the Asia-Pacific region. Specifically,
Peloton hopes to sell its fitness Bike, the pricier Bike+, and its interactive
membership app in Australia by the second half of 2021, but did not say when
other products would be available in the region.
As recently as last month, Peloton’s fiscal Q2 earnings report showed
revenue growing at a staggering 127% year on year, while EPS was 80% higher
than analysts expected. Sure, there’s an argument to be made that a
price-to-earnings (P/E) ratio in the triple digits is hard to sustain, but
we’re also talking about a company that has made the absolute most of the COVID
pandemic and looks set to retain their position as a market leader.
The company said it planned to invest more than $100 million in air freight
to help speed deliveries to customers. Its $420 million deal to acquire Precor,
an exercise equipment manufacturer, is also expected to help along those lines.
the bull note in the form of an upgrade from MKM Partners, where they raised
the equity to "buy" from "neutral," noting that the recent
selloff gives Peloton stock an "attractive" buying opportunity, the
majority of analysts were already optimistic toward the security.
fact, 19 of the 23 in coverage sport a "buy" or better rating. Plus,
the stock's 12-month consensus target price of $166.35 is a 64.1% premium to
last night's close.
Monday of this week, MKM Partners was the first to put their hand up and call
the current bout of selling overdone.
analyst Rohit Kulkarni expects the company to maintain their forward momentum
even as more and more people receive the COVID vaccine and rotate out of a
stay-at-home mindset. He pointed out that Peloton has a ton of potential in the
longer term as they start to position their products with the likes of gyms and
hotels. More immediate concerns about low inventory will hopefully soon be
remedied by management’s investments in air and ocean freight supply chains.
has been one of the main arguments from the bear camps in recent weeks, with
supply delays almost guaranteed to hurt the company’s revenue and profit
forecasts. But is it fair to say that after a 45% drop in the share price, this
potential downside has already been baked in?
also had some interesting first-hand experience-based points to make, including
the fact that his own Peloton Bike+ order was recently delivered ahead of
schedule and that the company’s ratings on the Better Business Bureau have been
steadily improving so far in March.