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COVID Winner Peloton Jumps on Solid Earnings: ETFs to Gain

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On Sep 10, Peloton Interactive Inc. (PTON - Free Report) reported earnings that breezed past Wall Street’s expectations. Notably, the company creates fitness products. The brand's content is accessible through the Peloton Bike, the Peloton Tread and Peloton Digital, which provide a full range of fitness offerings, anytime, anywhere, through IOS and Android as well as most tablets and computers.

As the COVID-19 outbreak resulted in closed gyms, fitness conscious consumers exercised at home with the help of digital workout alternatives. Peloton’s high-tech stationary bike and treadmill emerged two of the hottest commodities for people looking to work out at home during the pandemic. Shares surged 9.7% after market on Sep 10 (read: 3 New Coronavirus-Themed ETFs to Hog Attention in 2H).

Quarter in Focus

The connected-fitness company’s reported earnings of 27 cents beat analysts’ expectations of 10 cents while the company’s reported revenues of $607.1 million surpassed the estimate of $582.5 million. Sales surged 172% in the quarter. Part of that sales gain came from an uptick in its apparel business as workout apparel is in high demand amid the pandemic unlike regular clothing. As far as bottom line is concerned, the company swung to a profit 27 cents per share from a loss of $2.07 per share, a year earlier.

Peloton ended the quarter with more than 1.09 million connected fitness subscribers, up 113% from a year earlier, and roughly 3.1 million members in total, including those who only pay for its digital subscription. A CNBC article explained that “connected fitness subscribers are people who pay $39 per month to sync workout classes to their Peloton equipment, versus accessing the programs separately through a phone or tablet device and paying just $12.99.” Workouts undertaken by the subscribers jumped 333% to more than 76.8 million.

Upbeat Outlook  

The fitness equipment maker offered a smashing outlook for the current quarter and fiscal 2021, with the sales momentum of its bikes likely to remain strong in the near term.  In a letter to its shareholders, Peloton said it had expected demand to “moderate,” but a recent resurgence of COVID-19 cases has “perpetuated the imbalance of supply and demand,” as noted on CNBC.

The company said it doesn’t expect to return to “normalized order-to-delivery windows” in the United States before the end of the fiscal second quarter. Peloton projects its fiscal first-quarter sales within a range of $720 million to $730 million, which represents 218% year-over-year growth from the midpoint — topping analysts’ expectations for $506 million, according to Refinitiv estimates, as quoted on CNBC. Fiscal 2021 sales figure is likely to be between $3.5 billion and $3.65 billion. Midpoint of the range is up 96% year over year and way above the estimate of $2.7 billion.

ETFs to Benefit

Peloton is up 28.5% past month and 209% this year. Though the tech stock rout has weighed on many digital companies’ stocks this week, Peloton has managed to stay afloat having added 8.9% in the past week.

This underscores the strength in the company. Now, the latest earnings and a super upbeat outlook will give further boost to the company. Apart from scooping up the stock itself, investors can bet on some ETFs that have Peloton shares in it. Below we highlight those products.

Direxion Connected Consumer ETF (CCON - Free Report) – Peloton With 6.9% Share

Amplify Online Retail ETF (IBUY - Free Report) – Peloton With 4.64% Share

American Century Mid Cap Growth Impact (MID - Free Report) – Peloton With 3.84% Share

Invesco DWA Consumer Cyclicals Momentum ETF (PEZ - Free Report) – Peloton With 3.05% Share

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