The athletics and fitness products market is expected to expand as a result of increased awareness of physical and mental health, urban stress relief, and technological advancements.
However, as macroeconomic uncertainties remain, I think it would be wise to wait for a better entry point in Acushnet Holdings Corp. (GOLF). In addition, Peloton Interactive, Inc. (PTON) could be best avoided now, given its weak fundamentals.
The athletics and fitness industry strongly depends on consumer spending and discretionary money. This could result in a decrease in participation rates and overall revenue for businesses in this industry. According to Statista, the United States has a 62.94% chance of entering an economic recession by December 2024. This is increased from the previous month’s forecast of 51.84%.
Furthermore, the market has become highly competitive with the entry of new players and the expansion of existing brands. As a result, companies are constantly innovating and introducing new products to stay ahead of the competition.
Both companies are facing challenges with PTON dealing with supply chain issues and increasing competition, which could impact its growth potential. On the other hand, GOLF's performance is closely tied to the golf industry, which has been affected by declining participation rates.
Let us dive deeper into the fundamentals of the featured stocks:
Stock to Hold:
Acushnet Holdings Corp. (GOLF)
GOLF designs, develops, manufactures, and distributes golf products in the United States, Europe, the Middle East, Africa, Japan, Korea, and internationally. The company operates through four segments: Titleist Golf Balls; Titleist Golf Clubs; Titleist Golf Gear; and FootJoy Golf Wear.
GOLF’s trailing-12-month EBIT margin of 13.04% is 72.5% higher than the industry average of 7.56%. Its trailing-12-month levered FCF margin of 3.94% is 27.2% lower than the industry average of 5.41%.
For the fiscal third quarter that ended September 30, 2023, GOLF’s revenue and gross profit increased 6.3% and 4.6% year-over-year to $593.38 million and $308.52 million, respectively.
However, as of September 30, 2023, its total current assets stood at $1.03 billion, compared to $1.06 billion as of December 31, 2022. Also, its total liabilities stood at $1.24 billion, compared to $1.21 billion for the same period.
The consensus revenue estimate of $2.46 billion for the year ending December 2024, increased 2.3% year-over-year. Its EPS is expected to grow 5.7% year-over-year to $3.31 for the same period. It surpassed EPS estimates in all four trailing quarters. GOLF’s shares have gained 28.9% over the past year to close the last trading session at $63.78.
GOLF’s POWR Ratings reflect this mixed outlook. The stock has an overall C rating, equating to Neutral in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
GOLF also has a C grade for Value, Stability, Sentiment and Momentum. It is ranked #18 out of 35 stocks in the Athletics & Recreation industry. Click here for the additional POWR Ratings for Growth and Quality for GOLF.
Stock to Sell:
Peloton Interactive, Inc. (PTON)
PTON operates an interactive fitness platform in North America and internationally. The company offers connected fitness products with a touchscreen that streams live and on-demand classes under the Peloton Bike, Peloton Bike+, Peloton Tread, Peloton Tread+, Peloton Guide, and Peloton Row names.
PTON’s trailing-12-month asset turnover ratio of 0.93x is 5.7% lower than the industry average of 0.99x. Its trailing-12-month CAPEX / Sales of 1.57% is 49% lower than the industry average of 3.08%.
PTON’s adjusted net revenue for the first quarter ended September 30, 2023, decreased 3.4% year-over-year to $595.50 million. The company’s loss from operations narrowed 64.6% year-over-year to $132.30 million.
Also, its net loss attributable to Class A and Class B common stockholders and loss per share attributable to common stockholders narrowed 61% and 63.3% over the prior year’s quarter to $159.30 million and $0.44, respectively.
Analysts expect PTON’s revenue to come in at $2.70 billion for the year ending June 2024, decreased 3.4% year-over-year. Its EPS is expected to come in at negative $1.43 for the same period. It failed to surpass the EPS estimates in all four trailing quarters. The stock has lost 76.3% over the past year to close the last trading session at $4.02.
PTON has an overall D rating, equating to a Sell in our POWR Ratings system. It has an F grade for Stability and Sentiment. It is ranked #45 out of 52 stocks in the Consumer Goods industry.
Beyond what is stated above, we’ve also rated PTON for Growth, Value, Momentum and Quality. Get all PTON ratings here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
GOLF shares were trading at $63.97 per share on Tuesday afternoon, up $0.19 (+0.30%). Year-to-date, GOLF has gained 1.27%, versus a 3.61% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
Peloton (PTON) and Acushnet (GOLF) – a Strategic Look Before Making Moves StockNews.com
