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Buy This Cheap Stock as Apple, Lululemon Bet on Digital Fitness?
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Nautilus, Inc. has not received the same amount of love during the coronavirus as Peloton (PTON - Free Report) and others. Yet NLS stock has crushed Peloton in 2020, despite its early November selloff, and its portfolio of home-gym offerings is more diverse.
More importantly, the company’s outlook remains strong and some of its other fundamentals help make it a cheap stock that might be worth buying as Apple (AAPL - Free Report) and other firms bet on the future of digital-focused fitness.
Home-Gym Growth
Nautilus is one of the legacy players in the home-workout industry that Peloton has thrived in during the pandemic. The firm’s portfolio of home-gym equipment includes Bowflex, Nautilus, Octane Fitness, and Schwinn. These offerings feature free weights, treadmills, ellipticals, indoor cycling equipment, and more. This helps make it a more diverse firm than Peloton, which only sells treadmills and stationary bikes.
NLS beat our third earnings and revenue estimates on November 9. The company’s gross profit soared over 255%, with sales up 152% to $155 million. Investors should note that this top-line growth outpaced Q2’s 94% sales expansion and Q1’s 11. And it was able to grow both its DTC and in-store sales, with direct up 277% and retail up 108%.
Nautilus entered the fourth quarter with a backlog of $72.8 million, as it races to bolster its production in order to keep up with demand. On top of that, Nautilus CEO Jim Barr, who took over the firm last summer, came in with a plan to push into the connected workout space. And these efforts have paid off during the coronavirus, as gyms around North America remain closed or at limited capacity.
What Else
Nautilus has rolled out new products with “immersive digital” capabilities via connected monitors, which is key as people look to find on-demand digital workout classes at home. This includes its newer membership-based digital cardio offering called JRNY. “We hired a Chief Digital Officer who has implemented large-scale digital experiences at some of the world's top technology companies to lead our JRNY and e-commerce teams and accelerate our ongoing digital transformation,” CEO Jim Barr said in prepared Q3 remarks.
Nautilus appears poised to benefit from the broader trend of at-home, digital focused workouts where people follow along with various classes on their TVs, smartphones, connected monitors, and more. The market clearly has plenty of potential for growth.
Athleisure giant Lululemon (LULU - Free Report) announced in June its plans to buy at-home fitness startup Mirror for $500 million. Plus, Apple (AAPL - Free Report) just launched its new subscription-based connected workout platform dubbed, Fitness+.
All of this helps showcase how important the industry is and it could gain more traction if people grow accustomed to working out at home. And even if a vaccine is rolled out successfully over the next year, it is unclear how quickly people will race back to a crowded gym.
Wall Street has clearly taken notice and it helped send NLS stock soaring in 2020. NLS has surged over 900% in the last year to crush PTON, Zoom Video (ZM - Free Report) , and other pandemic high-flyers.
This run includes a 150% climb in the last six months. Investors who haven’t bought NLS might also be pleased to see that it already experienced a big post-earnings selloff, which coincided with positive vaccine news.
NLS popped over 3% on Monday to close regular trading at $17.08 a share, which puts it about 40% off its early November highs of roughly $28 a share.
The stock is also trading at 0.9X forward 12-month sales. This marks a discount compared to its own six-month median, its industry’s 2.4X average, and PTON’s 7.7X.
Bottom Line
Looking ahead, Zacks estimates call for its fourth quarter revenue to surge 83%, with Q1 FY21 projected to climb another 56%. Meanwhile, adjusted earnings are projected to soar by roughly 533% this quarter and 525% next quarter. And it has crushed our bottom-line estimates by an average of 300% in the trailing four periods.
The stock’s earnings revisions help it land a Zacks Rank #1 (Strong Buy) right now. Nautilus also rocks an “A” grade for Growth and a “B” for Value in our Style Scores system and it’s part of an industry that rests in the top 3% of our over 250 Zacks industries.
In the end, Nautilus and others could continue to see increased demand because gyms might be some of the last things to return to normal no matter what happens. And the stock’s under $20 a share price tag and solid valuation have stirred up buyout speculation, within the hot space.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
Buy This Cheap Stock as Apple, Lululemon Bet on Digital Fitness?
Nautilus, Inc. has not received the same amount of love during the coronavirus as Peloton (PTON - Free Report) and others. Yet NLS stock has crushed Peloton in 2020, despite its early November selloff, and its portfolio of home-gym offerings is more diverse.
More importantly, the company’s outlook remains strong and some of its other fundamentals help make it a cheap stock that might be worth buying as Apple (AAPL - Free Report) and other firms bet on the future of digital-focused fitness.
Home-Gym Growth
Nautilus is one of the legacy players in the home-workout industry that Peloton has thrived in during the pandemic. The firm’s portfolio of home-gym equipment includes Bowflex, Nautilus, Octane Fitness, and Schwinn. These offerings feature free weights, treadmills, ellipticals, indoor cycling equipment, and more. This helps make it a more diverse firm than Peloton, which only sells treadmills and stationary bikes.
NLS beat our third earnings and revenue estimates on November 9. The company’s gross profit soared over 255%, with sales up 152% to $155 million. Investors should note that this top-line growth outpaced Q2’s 94% sales expansion and Q1’s 11. And it was able to grow both its DTC and in-store sales, with direct up 277% and retail up 108%.
Nautilus entered the fourth quarter with a backlog of $72.8 million, as it races to bolster its production in order to keep up with demand. On top of that, Nautilus CEO Jim Barr, who took over the firm last summer, came in with a plan to push into the connected workout space. And these efforts have paid off during the coronavirus, as gyms around North America remain closed or at limited capacity.
What Else
Nautilus has rolled out new products with “immersive digital” capabilities via connected monitors, which is key as people look to find on-demand digital workout classes at home. This includes its newer membership-based digital cardio offering called JRNY. “We hired a Chief Digital Officer who has implemented large-scale digital experiences at some of the world's top technology companies to lead our JRNY and e-commerce teams and accelerate our ongoing digital transformation,” CEO Jim Barr said in prepared Q3 remarks.
Nautilus appears poised to benefit from the broader trend of at-home, digital focused workouts where people follow along with various classes on their TVs, smartphones, connected monitors, and more. The market clearly has plenty of potential for growth.
Athleisure giant Lululemon (LULU - Free Report) announced in June its plans to buy at-home fitness startup Mirror for $500 million. Plus, Apple (AAPL - Free Report) just launched its new subscription-based connected workout platform dubbed, Fitness+.
All of this helps showcase how important the industry is and it could gain more traction if people grow accustomed to working out at home. And even if a vaccine is rolled out successfully over the next year, it is unclear how quickly people will race back to a crowded gym.
Wall Street has clearly taken notice and it helped send NLS stock soaring in 2020. NLS has surged over 900% in the last year to crush PTON, Zoom Video (ZM - Free Report) , and other pandemic high-flyers.
This run includes a 150% climb in the last six months. Investors who haven’t bought NLS might also be pleased to see that it already experienced a big post-earnings selloff, which coincided with positive vaccine news.
NLS popped over 3% on Monday to close regular trading at $17.08 a share, which puts it about 40% off its early November highs of roughly $28 a share.
The stock is also trading at 0.9X forward 12-month sales. This marks a discount compared to its own six-month median, its industry’s 2.4X average, and PTON’s 7.7X.
Bottom Line
Looking ahead, Zacks estimates call for its fourth quarter revenue to surge 83%, with Q1 FY21 projected to climb another 56%. Meanwhile, adjusted earnings are projected to soar by roughly 533% this quarter and 525% next quarter. And it has crushed our bottom-line estimates by an average of 300% in the trailing four periods.
The stock’s earnings revisions help it land a Zacks Rank #1 (Strong Buy) right now. Nautilus also rocks an “A” grade for Growth and a “B” for Value in our Style Scores system and it’s part of an industry that rests in the top 3% of our over 250 Zacks industries.
In the end, Nautilus and others could continue to see increased demand because gyms might be some of the last things to return to normal no matter what happens. And the stock’s under $20 a share price tag and solid valuation have stirred up buyout speculation, within the hot space.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>