Home fitness company Peloton (Peloton Stock Quote, Chart, News NASDAQ:PTON) may be firing on all cylinders during the new work-from-home reality but $85 per share? That’s too much, says Jim Cramer, host of CNBC’s Mad Money.
It’s been a heck of a ride for Peloton over its first year as a public company. Initially raising a whopping $1.16 billion in its IPO last September, the stock had a slow start but quickly picked up the pace once COVID-19 rolled around. PTON has more than tripled in value since March, rewarding early investors and leaving the rest of us wondering if we’ve missed the proverbial boat.
Not likely, says Cramer, who thinks Peloton is too hot right now.
“I like Peloton, but I think it’s run up way too far,” Cramer said, speaking on CNBC’s Lightning Round on Thursday. “I do believe that there’s a stay-at-home exercise community … but the stock has had a very big run.”
“I think it can go higher, but I don’t like the risk-reward here,” Cramer said. Peloton seems poised for growth and looks to be gaining momentum at the right time. The company currently has 3.1 million members for its stationary bike and treadmill platforms, including 1.1 million Connected Fitness subscribers at $39 per month, while revenue has been climbing fast.
Over Peloton’s latest quarter, its fiscal fourth 2020, released last week, sales jumped from $223.3 million a year ago to $607.1 million, managing to beat analysts’ estimates at $582.5 million. (All figures in US dollars.) The company is now making money, too, posting a profit of $89.1 million or $0.27 per share versus a loss of $47.4 million or $2.07 per share for Q4 of fiscal 2019.
“Fiscal year 2020 was a transformative year for Peloton. We made great progress in scaling our business, from manufacturing and logistics, to member support and eld operations. We launched operations in Germany, our first foreign language market, and continued to grow our footprint in the United States, Canada, and the United Kingdom,” said Peloton in its quarterly investor letter.
Peloton got a boost of confidence this week from investment bankers Stifel, who now expects the company’s market value to double from $30 billion to $60 billion over the next for years, bringing in an annualized return of 19 per cent.
And while competition is heating up in the home fitness space with strength training company Tonal and now Apple jumping into the ring with Apple Fitness, Stifel said Peloton’s growth trajectory is strong.
“We think Peloton is the Apple of fitness but we don’t think Apple is the Peloton of fitness,” said Stifel analyst Scott Devitt on Tuesday.
No one can say Peloton’s ambitions are too small. The company has laid out a plan to reach 100 million subscribers by the 15-year mark and CEO and founder John Foley seems to make no bones about aiming for the lofty heights of some of the FAANG stocks like Apple .
“Certainly, 100 million subscribers gets us in that rarefied air of some of the FAANG stocks. We think that Peloton has the opportunity to be one of those special companies, and we have thousands of people at Peloton who are marching in that direction every day and it doesn't look like we're slowing down anytime soon,” said Foley to Yahoo Finance.