Peloton’s (NASDAQ:PTON) Q2 Sales Top Estimates, Stock Soars

Exercise equipment company Peloton (NASDAQ:PTON) reported Q2 CY2024 results exceeding Wall Street analysts’ expectations, with revenue flat year on year at $643.6 million. On the other hand, next quarter’s revenue guidance of $570 million was less impressive, coming in 5.9% below analysts’ estimates. It made a GAAP loss of $0.08 per share, improving from its loss of $0.68 per share in the same quarter last year.

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Started as a Kickstarter campaign, Peloton (NASDAQ: PTON) is a fitness technology company known for its at-home exercise equipment and interactive online workout classes.

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Sales Growth

Reviewing a company’s long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one tends to sustain growth for years. Luckily, Peloton’s sales grew at an excellent 24.2% compounded annual growth rate over the last five years. This shows it expanded quickly, a useful starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or emerging trend. Peloton’s recent history marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 13.2% over the last two years.

This quarter, Peloton’s $643.6 million of revenue was flat year on year but beat Wall Street’s estimates by 2.6%. The company is guiding for a 4.3% year-on-year revenue decline next quarter to $570 million, a deceleration from the 3.4% year-on-year decrease it recorded in the same quarter last year. Looking ahead, Wall Street expects revenue to decline 1% over the next 12 months, a deceleration from this quarter.

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Cash Is King

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

While Peloton posted positive free cash flow this quarter, the broader story hasn’t been so clean. Over the last two years, Peloton’s demanding reinvestments to stay relevant have drained its resources. Its free cash flow margin was among the worst in the consumer discretionary sector, averaging negative 10.1%.

Peloton’s free cash flow clocked in at $26 million in Q2, equivalent to a 4% margin. This quarter’s result was nice as its cash flow turned positive after being negative in the same quarter last year

Key Takeaways from Peloton’s Q2 Results

We were impressed that Peloton beat analysts’ revenue and EPS expectations this quarter. The company is undergoing a turnaround, and it grew sales in the quarter compared to the prior year, a first in more than two years. While its full-year revenue guidance missed Wall Street’s estimates, adjusted EBITDA guidance was better. Overall, this was a good and encouraging quarter for a company that has struggled mightily in the past few years. The stock traded up 5.7% to $3.55 immediately after reporting.

So should you invest in Peloton right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.