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Aug 22, 2022

Peloton (PTON) Q4 Earnings Preview August 2022

By:Ryan Sullivan

Key Takeaways:

  • PTON produces Internet-connected stationary bicycles and treadmills that enable monthly subscribers to remotely participate in classes via streaming media.
  • PTON is down significantly over the last 24-month period.
  • PTON’s financial statements do not look constructive, heading down a difficult path.
  • Premium is rich in PTON, making for good premium selling opportunities in the near term.

When does Peloton Interactive Inc. (PTON) report Q4 2022 earnings?

Peloton Interactive Inc. (PTON) reports earnings on August 25th, 2022, before the open. Current earnings estimates are about -$0.87.

What does PTON do?

Peloton Interactive Inc. is an American exercise equipment and media company headquartered in New York City. Peloton's primary products are Internet-connected stationary bicycles and treadmills that enable monthly subscribers to remotely participate in classes via streaming media. Peloton charges a monthly membership fee to access classes and additional features on their exercise equipment, or a lower price for users only accessing the content via app or website. PTON’s content is accessible through the Peloton Bike, the Peloton Tread, and Peloton Digital, which provides a full slate of fitness offerings through IOS and Android as well as most tablets and computers.

Fig. 1: Year to date price percentage change for SPY, GLD, and PTON.

How has PTON been performing?

PTON is currently trading at $11.59, down 67.88 percent from its opening price of 2022. PTON’s all-time high price is $171.09, which was posted in January of 2021. This all-time high price correlates to the COVID-19 pandemic lockdowns

Key Takeaways:

  • PTON produces Internet-connected stationary bicycles and treadmills that enable monthly subscribers to remotely participate in classes via streaming media.
  • PTON is down significantly over the last 24-month period.
  • PTON’s financial statements do not look constructive, heading down a difficult path.
  • Premium is rich in PTON, making for good premium selling opportunities in the near term.

When does Peloton Interactive Inc. (PTON) report Q4 2022 earnings?

Peloton Interactive Inc. (PTON) reports earnings on August 25th, 2022, before the open. Current earnings estimates are about -$0.87.

What does PTON do?

Peloton Interactive Inc. is an American exercise equipment and media company headquartered in New York City. Peloton's primary products are Internet-connected stationary bicycles and treadmills that enable monthly subscribers to remotely participate in classes via streaming media. Peloton charges a monthly membership fee to access classes and additional features on their exercise equipment, or a lower price for users only accessing the content via app or website. PTON’s content is accessible through the Peloton Bike, the Peloton Tread, and Peloton Digital, which provides a full slate of fitness offerings through IOS and Android as well as most tablets and computers.

peloton-spy-chart.png
Fig. 1: Year to date price percentage change for SPY, GLD, and PTON.

How has PTON been performing?

PTON is currently trading at $11.59, down 67.88 percent from its opening price of 2022. PTON’s all-time high price is $171.09, which was posted in January of 2021. This all-time high price correlates to the COVID-19 pandemic lockdowns, when investors bought up the stock with the assumption that PTON would appreciate as more people purchased their exercise equipment while they were at home.

Since then, PTON has sold off a lot, remaining in a downtrend since January of 2021. PTON’s current IV Rank is 80.8 based on the tastyworks trading platform calculation. The implied volatility for August options is about 142 and implied volatility for September options is about 131.

Price action over the last three months has been constructive, forming a base in the $8.50 to $11.30 range. Recent rallies are selling off and PTON is testing the $11.30 support level. Based on recent market activity, it is likely that PTON price action will continue to test this support level and move sideways.

The catalyst for a move through this support level will be an earnings miss. The market is already pricing in a negative earnings report. Anything worse than current estimates will force the market to re-price this stock at a lower level.

How are PTON’s financials looking?

PTON’s income statement over the last five quarters is deconstructive. Total sales fell in that period and net income became more negative each quarter. Total sales dropped from $1.2 billion to $942 million over the five-quarter period, recording lower sales in between. Net income fell from -$8.6 million to -$757 million.

PTON’s balance sheet over the last five quarters has remained consistent. Total assets have remained around $4.5 billion, jumping to $5.4 billion two quarters ago. Total liabilities have oscillated between $2.7 billion and $3.2 billion.

These financial statements indicate that PTON has the risk in assets and liabilities that it needs to deliver its products. However, the sales and income that PTON needs to operate is not being generated from the risk that they are taking on.

This indicates that PTON is heading down a road that they cannot recover from without some pain. If PTON is not able to generate sales that lead to growing net income, they are going to have to change how they operate. They will need to downsize their operating costs and potentially seek new ownership. The market appears to recognize these realities for PTON.

How should I trade PTON August 2022 earnings?

Outside of a surprise earnings miss that reports a much lower negative number than what is expected, we will likely see PTON remain in the $10 to $15 range. PTON doesn’t have the financial reports to illicit growth, and it is likely the market has priced in the continued lack of income. That is a recipe for sideways movement, but anything could happen.

The outside risk also includes a large investor exiting their position on the earnings report. This could move the market significantly, but likely only for a short period of time before returning to a balanced valuation.

Since there is a lot of premium to sell, iron condors or strangles are attractive for this stock going into earnings. If you want to make a directional trade stay out of the money. If you are bullish on PTON in the near term, selling naked puts is an option here especially if you are trying to build a PTON stock position moving forward.

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