Peloton Could Rally After Earnings

Peloton Interactive Inc. (PTON) reports fiscal Q4 2021 earnings on Thursday, with analysts expecting the fitness provider to post a $0.34 per-share loss on $923.5 million in revenue. If met, the loss will mark a turnaround from the $0.27 profit booked in the same quarter last year. The stock ended a five month slide in May after beating Q3 top and bottom line estimates, despite a loss of $0.03 per-share, but remains stuck in the lower half of an 11-month trading range.

Shaking Off Headwinds

The stock fell with other COVID beneficiaries at the start of 2021 and turned higher when the Delta variant hit American news headlines. Controversies about treadmill recalls and injured kids are receding but fitness centers have remained open during the latest outbreak and they’re jammed with customers tired of working out in private. Peloton has responded with initiatives that include armband heart rate monitors and partnerships with corporate wellness providers.

Hedge funds are also moving back into Peloton, as evidenced by recent SEC disclosures. Tiger Global, Viking Global, and Third Point Management all increased position size during the quarter, suggesting comfort with the company’s long-term outlook. That buying pressure has shown up on technical charts as well, with accumulation readings lifting above 2020 levels, even though the stock is still trading more than 60 points under January’s all-time high.

Wall Street and Technical Outlook

Wall Street consensus has dipped in the last three months and is now standing at an ‘Overweight’ rating, based upon 20 ‘Buy’, 2 ‘Overweight’, 5 ‘Hold’, and 2 ‘Sell’ recommendations. Price targets currently range from a low of $45 to a Street-high $185 while the stock closed Friday’s session more than $25 below the median $135 target. This humble placement should support higher prices if Peloton beats top and bottom line estimates this week.

Peloton rallied above the 2019 peak at 37.02 in May 2020 and took off in a powerful uptrend that posted an all-time high at $171.09 in January 2021. It got cut in half into May and bounced, reversing again after mounting the 50% selloff retracement. The stock is now wrapping up the third month of testing at the 200-day moving average while weekly Stochastic readings have hit oversold levels. This is a potent combination for a relief rally after this week’s confessional.

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Disclosure: the author held no positions in aforementioned securities at the time of publication.