Last week, you might have seen that Peloton Interactive, Inc. (NASDAQ:PTON) released its annual result to the market. The early response was not positive, with shares down 4.2% to US$82.01 in the past week. It looks like the results were pretty good overall. While revenues of US$1.8b were in line with analyst predictions, statutory losses were much smaller than expected, with Peloton Interactive losing US$0.32 per share. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Check out our latest analysis for Peloton Interactive
Taking into account the latest results, the consensus forecast from Peloton Interactive's 24 analysts is for revenues of US$3.58b in 2021, which would reflect a huge 96% improvement in sales compared to the last 12 months. Earnings are expected to improve, with Peloton Interactive forecast to report a statutory profit of US$0.076 per share. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$2.71b and losses of US$0.25 per share in 2021. So we can see that the latest results have sparked a pretty clear upgrade to expectations, with higher revenues expected to lead to profit sooner than previously forecast.
It will come as no surprise to learn that the analysts have increased their price target for Peloton Interactive 59% to US$111on the back of these upgrades. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Peloton Interactive analyst has a price target of US$138 per share, while the most pessimistic values it at US$33.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's clear from the latest estimates that Peloton Interactive's rate of growth is expected to accelerate meaningfully, with the forecast 96% revenue growth noticeably faster than its historical growth of 51%p.a. over the past three years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 14% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Peloton Interactive is expected to grow much faster than its industry.
The Bottom Line
The most important thing to take away is that there's been a clear step-change in belief around the business' prospects, with the analysts now expecting Peloton Interactive to become profitable next year. Happily, they also upgraded their revenue estimates, and are forecasting revenues to grow faster than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Peloton Interactive going out to 2025, and you can see them free on our platform here.
Even so, be aware that Peloton Interactive is showing 1 warning sign in our investment analysis , you should know about...
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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