New Year, new me for Peloton and Nautilus: How will PTON and NLS perform in 2023?
By Jenny McCall
14:28, 9 January 2023
It’s a new year and with that comes new year resolutions, dry January and fitness regimes begin. So what does this mean for home fitness stocks like Peloton (PTON) and Nautilus (NLS) and how will they perform in 2023?
Last year, Peloton stock fell by 77% and Nautilus plummeted 75%, as fitness fanatics returned to gyms and stopped using their at-home exercise equipment. They were pandemic darlings, but this changed in 2022 – will it be the case for this year?
What is your sentiment on PTON?
Peloton (PTON) share price chart
Will PTON have to pedal faster in 2023?
Since CEO John Foley departed in 2022 and former Spotify CFO Barry McCarthy stepped into the role of Peloton chief, it seems PTON stock has faced high resistance.
As well as selling its bikes and treadmills, the company also operates a subscription-based business, where users sign up and receive daily workouts from spin-classes to boxing and yoga.
In 2022, Peloton struggled to maintain those subscribers, as users returned to the bricks-and-mortar gyms after the pandemic.
“While management was seeing pent-up demand for lower-priced treadmills, 50% of initial sales are expected to go to existing bike users, generating minimal new subscription revenue,” Jason Helfstein, an analyst at Oppenheimer, told Capital.com.
“Peloton provided a solution for those mourning the closure of gyms and exercise classes during lockdown. Slick marketing and a strong fanbase meant the group did exceptionally well. Part of the group’s appeal was that it didn’t just offer the infamous Peloton bike,” said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown.
“It also offered users an immersive – and very lucrative – subscription to classes. Peloton’s revenue during the pandemic more than doubled to $4.0bn.”
With that said, PTON has had a good start to 2023, as people start to exercise the “new year, new me” mantra and burn off the Christmas calories. Its stock price is up by 12% so far this year.
In addition, it appears the company was the target of “unusually large” options trading this month and some Wall Street analysts are forecasting growth for the stock.
“Stock analysts at William Blair upped their Q2 2023 EPS estimates for Peloton Interactive in a research report issued to clients and investors on Wednesday, January 4th. William Blair analyst R. Schackart now anticipates that the company will earn ($0.84) per share for the quarter, up from their previous forecast of ($0.85),” analysts at MarketBeat wrote in a note.
“JMP Securities reduced their target price on Peloton Interactive from $25.00 to $16.00 and set a ‘market outperform’ rating for the company in a report in November.”
Investors more upbeat
PTON's last quarterly earnings were released on Thursday 3 November, where the company reported revenue of $616.50m (£506.836m) for the quarter, compared to analysts' expectations of $638.73m. Total revenue for the year was also down by 23%.
But that hasn’t stopped institutional investors and hedge funds from recently updating their holdings.
Wahed Invest LLC acquired a new position in Peloton Interactive during the second quarter valued at $29,000. In addition, Exchange Traded Concepts LLC increased its position in Peloton Interactive by 943.8% in the 3rd quarter.
“Exchange Traded Concepts LLC now owns 4,509 shares of the company's stock worth $31,000 after purchasing an additional 4,077 shares during the last quarter,” MarketBeat analysts said.
But PTON is not clear of danger – just yet. The stock will still have to sweat a little, if it's to recover in 2023.
BMO Managing Director Simeon Siegel said that Peloton is the best “emblematic story” right now. After it saw its business collapse and then business surge during the pandemic, Siegel said PTON had built its organisation as if it would “last forever.”
“Right now, new management is doing an excellent job at removing fixed costs. But that does mean they’re a grower,” Siegal said.
“It does not mean they have this limitless Total Addressable Market (TAM). It doesn't mean they can find more people to buy the bikes as people continue to cancel them. And so for that, I think where we are right now, I'd be more concerned. I still think the product is excellent, but worry that from a stock perspective, it's inflated.”
Nautilus (NLS) share price chart
How unfit is NLS stock?
Back in September the US fitness equipment manufacturer, Nautilus (NLS) announced that it was seeking out "strategic alternatives" for its business, which included a possible sale of the company.
Nautilus, which competes against groups such as Peloton, was founded in 1986 in the hope that it would become a global leader in innovative home fitness solutions.
Like PTON, Nautilus has struggled to regain its pandemic highs, when it reached $28.43 and now, as of 6 January it trades at $1.51.
Last year, NLS announced it would have to recall more than 7,300 of its T616 and T618 treadmills.
The US Consumer Product Safety Commission recall alert said: “The treadmills can start on their own, posing a fall hazard to a user.”
Analysts are far from optimistic on the stock and its future outlook.
NLS made a revision to its near-term forecasts last year, causing analysts to slash their outlooks. Truist analyst Michael Swartz dropped his stock price target to $5 from $15 while keeping his rating at buy.
Analysts have given NLS stock a consensus estimate of $324m revenue in 2023, which would reflect a 16% drop on its sales over the last 12 months.
Last year, analysts increased their forecast losses, indicating that there was trouble at Nautilus and now it has downgraded its revenue estimates and data suggests that NLS revenues are expected to grow slower than the wider market.
It would seem that fitness stocks PTON and NLS have had a slow start in 2023, albeit we are still in the first week of the year and Peloton has seen an increase in its stock price during this time. If the two are to see some positive share price movements this year, it looks like they will need to do more than just release new bikes, treadmills and equipment. Both organisations need to maintain their current customer subscriptions and also ensure they add new subscribers.
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