Peloton Interactive (NASDAQ:PTON) has been one of many hottest shares of 2020. The high-end train bike maker’s inventory has practically quadrupled because the starting of the 12 months, because the COVID-19 disaster sparked brisk gross sales of its bikes and tethered extra customers to its subscription providers.

Peloton’s numbers had been definitely compelling. In fiscal 2020, which ended on June 30, its gross sales doubled to $1.83 billion, its variety of subscribers rose 113% to 1.09 million, and its web loss narrowed from $196 million to $72 million. It additionally posted an adjusted EBITDA of $118 million, in comparison with a lack of $71 million a 12 months in the past.

Picture supply: Peloton.

That progress continued within the first quarter of 2021. Its income surged 232% 12 months over 12 months to $758 million, its subscriptions climbed 137% to 1.33 million, and it posted a web revenue of $69 million, in comparison with a lack of $50 million a 12 months in the past. Its adjusted EBITDA hit $119 million, in comparison with a lack of $21 million final 12 months.

Peloton additionally stays optimistic in regards to the future. It expects its income to rise at the least 113% for the total 12 months, its subscriber base to roughly double, and its adjusted EBITDA to develop greater than 155%.

These numbers appear to make Peloton a terrific progress inventory, however can the corporate keep its momentum after the pandemic ends? Let’s have a look at the place this sizzling inventory might be headed over the subsequent 12 months.

How does Peloton earn a living?

Peloton operates two primary enterprise segments. The related health merchandise phase, which sells its train bikes and associated merchandise, generated 80% of its income final quarter. The remaining 20% got here from its subscriptions.

Peloton’s bike presently prices $1,895, and bundles that add sneakers, headphones, bike weights, a coronary heart fee monitor, and different gear price as much as $2,345. That is considerably pricier than the common train bike, which often prices between $100 and $500.

Peloton’s premium bikes cannot do a lot with out subscriptions, which hyperlink customers to video spin lessons on its touchscreen. Subscribers who personal Peloton {hardware} pay $39 monthly for these lessons, whereas those that do not personal the bikes can nonetheless pay $13 a month for studio and outside lessons.

Peloton’s enterprise mannequin is just like Apple‘s (NASDAQ:AAPL). Each firms promote premium variations of merchandise that may be purchased at a lot decrease costs, then lock of their customers with sticky subscription providers. That is why Peloton is incessantly talked about as a possible buyout candidate for Apple.

A fad or a secular pattern?

Peloton had already established a first-mover’s benefit in its area of interest of distant spin lessons when it went public, however the closures of gyms in the course of the pandemic lit a fireplace below its enterprise.

Peloton’s subscribers additionally labored out much more in the course of the disaster. Within the first quarter of 2020, every subscriber participated in a mean of 20.7 exercises monthly, up from 11.7 within the prior-year quarter. It additionally retained 92% of its current subscribers over the previous 12 months.

Picture supply: Peloton.

However we have seen loads of different sizzling first movers, like GoPro (NASDAQ:GPRO) and Fitbit (NYSE:FIT), generate explosive progress after their public debuts earlier than stalling out. Each firms saturated their preliminary markets, struggled with lengthy improve cycles, and confronted cheaper opponents.

Peloton does not face many direct opponents proper now, however its moat is not that large. In its S-1 submitting, Peloton admits it operates in a “extremely aggressive market” and faces “important competitors in each side of our enterprise, together with at-home health gear and content material, health golf equipment, in-studio health lessons, and well being and wellness apps.” Peloton expects that competitors to “intensify sooner or later as new and current opponents introduce new or enhanced services and products that compete with ours.”

Apple’s upcoming launch of Health+, its $10-per-month subscription service that streams video exercises tethered to the Apple Watch, highlights that danger. If Apple customers can merely stream exercises for traditional train bikes and different gear on their iPhones, will folks nonetheless purchase Peloton’s dear bikes?

Moreover, Peloton’s common month-to-month exercises per subscriber declined 16% sequentially within the first quarter, which ended on Sept. 30 and coincided with some health club reopenings throughout America. Wanting forward, traders ought to pay shut consideration to Peloton’s sequential progress to see if it could possibly keep its post-pandemic momentum, or if it is prone to turning into the subsequent GoPro or Fitbit.

The place will this inventory be in a 12 months?

Analysts count on Peloton’s income to rise 116% this 12 months and for its earnings to greater than triple. Subsequent 12 months, they count on its income and earnings to rise by 33% and 97%, respectively. Primarily based on these estimates, Peloton’s inventory trades at six instances subsequent 12 months’s gross sales and 164 instances subsequent 12 months’s earnings.

These valuations are a bit excessive, however Peloton continues to be cheaper than another high-growth tech shares. Nonetheless, uncertainties about Peloton’s post-pandemic progress and future competitors are nonetheless stopping me from touching this sizzling inventory proper now. Peloton had a terrific run and it might nonetheless head greater, but it surely most likely will not replicate its features from this 12 months anytime quickly.