Bank of America analyst Justin Post believes Peloton (NASDAQ:PTON) could deliver a beat on the subscribers added in the fiscal third quarter.
The Street consensus currently stands at roughly 235,000 subs added with Post expecting PTON to potentially add 250k-260k gross sub adds.
Total visits to Pelotons US, Canada, UK, Germany and Australia sites for F3Q declined 24% y/y, vs down 1% in F2Q, but continues to be well above competition. Q/Q total visits were up 3%, while street estimates call for a significant Q/Q decline in gross adds (lower conversion rates are likely in F3Q vs F2Q), Post said in a client note.
Peloton term searches were down 28% YoY, worse than the decline of 21% in the prior quarter. Similarly, downloads for Peloton were down 49% YoY, much worse than the 27% decline in F2Q. For Post, this signals that the reopening headwinds continue to hurt Peloton.
Net-net, Post continues to be generally positive on Peloton, especially after the new CEO Barry McCarthy took over.
Key driver for stock on earnings call likely to be sentiment on new CEO's commentary on business model changes and potential subscriber growth acceleration, with risk that Peloton incurs higher upfront costs to accelerate subscriber growth. Other risks are lower usage metrics on reopening and a potential seasonal increase in F4Q churn. We think Peloton subscriber and content base are strong assets in the space, with advantages vs peers to transform business model under new CEO. We also think highly of new CEO Barry McCarthy's track record at subscription companies, Post added.
Peloton stock is down 1.3% in pre-open Wednesday.