Peloton Interactive, Inc. (NASDAQ:PTON) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals.
After the upgrade, the 25 analysts covering Peloton Interactive are now predicting revenues of US$3.6b in 2021. If met, this would reflect a huge 97% improvement in sales compared to the last 12 months. The losses are expected to disappear over the next year or so, with forecasts for a profit of US$0.078 per share this year. Yet before this consensus update, the analysts had been forecasting revenues of US$2.7b and losses of US$0.25 per share in 2021. So we can see that this has sparked a pretty clear upgrade to expectations, with higher revenues anticipated to lead to profit sooner than previously forecast.
With these upgrades, we're not surprised to see that the analysts have lifted their price target 61% to US$113 per share. 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. There are some variant perceptions on Peloton Interactive, with the most bullish analyst valuing it at US$138 and the most bearish at US$33.00 per share. 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.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Peloton Interactive's past performance and to peers in the same industry. It's clear from the latest estimates that Peloton Interactive's rate of growth is expected to accelerate meaningfully, with the forecast 97% revenue growth noticeably faster than its historical growth of 51% p.a. over the past three years. Compare this with other companies in the same industry, which are forecast to grow their revenue 14% next year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Peloton Interactive to grow faster than the wider industry.
The Bottom Line
The most important thing to take away from this upgrade is that there is now an expectation for Peloton Interactive to become profitable this year, compared to previous expectations of a loss. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. Given that the consensus looks almost universally bullish, with a substantial increase to forecasts and a higher price target, Peloton Interactive could be worth investigating further.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Peloton Interactive analysts - going out to 2025, and you can see them free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
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