Profit Pregame

The Biggest Red Flag When It Comes to Investing in Peloton

The Peloton Dilemma…

The pandemic brought a boost to many industries thanks to the stay-at-home orders the country faced. From video games to cleaning supplies to at-home workout equipment – consumers focused their spending on things that would keep them busy.

And Peloton has been at the top of seemingly every buyer’s wish list, it seems. And that demand isn’t going anywhere anytime soon, especially seeing that the company is seeing an uptick in demand for its high-end exercise bikes and treadmills. And this makes sense seeing that America’s Covid-19 cases are rising at a rapid rate.

“The recent spikes in Covid cases and newly imposed lockdowns in some of our markets have had a significant positive impact on sales,” Peloton CFO Jill Woodworth told analysts Thursday.

Peloton reported their first-quarter recently and sales more than triples, exceeding the company’s expectations. This outstanding performance led to the company raising its 2021 fiscal revenue outlook. And now, Peloton expects this holiday quarter to be its first billion-dollar quarter for sales.

This growth in consumer interest and the fact more consumers are also turning to its at-home workout products and live-streamed classes have caught my eye, no doubt. But there’s one red flag I’m seeing – and it’s a problem many companies are facing. Increased demand is something to be celebrated, but the company expects to be operating under supply constraints for the foreseeable future because of this uptick.

Supply chain problems can cause significant problems for a company – even one doing as well as Peloton. So, for now, I’m going to sit back and watch from the sidelines. But I’ll be sure to keep you updated.

Your Post-Election Trading Tip…

Look, we all know that the news is always fashionably late to the party. There’s nothing wrong with that; it’s completely natural. News reports on events after they happen. And that also applies to stock prices and market movements.

When the market rallies higher or sinks lower, the news reports on it after it happens. But as traders, we need to be hyper-aware that the talking heads on TV aren’t economists. They’re reporters. That’s why I don’t watch TV to decide which stocks I’m going to buy. Everyone knows it’s too late to get in once the news starts reporting it.

So stop watching so much TV. I run a trading room so I can guide everyday people on how to read the market in realtime. Once you understand how to read price action and price momentum, you’ll be able to start predicting which stories the news will report that day.

And that’s when you start winning big in the stock market.

An earnings report that has caught my eye:

We’ve got more earnings reports coming in this week.

But I’ve got you covered. You don’t have to watch the news or crunch the numbers. There’s only one earnings report that I’m focusing on this week. And as far as I’m concerned, it’s the only one that’s worth paying attention to.

The earnings report I’m anticipating is Datadog, Inc. (DDOG)

They’re releasing their Q3 earnings report tomorrow, and the company expects revenues up to $145 million. This would indicate a 50% year-over-year growth. Not to mention, DDOG smashed the Zacks Consensus Estimate for the past four quarters. And they ended this year’s Q2 with 1,015 customers who pay more than $100,000/year – that’s up 71% year-over-year.

DDOG is a cloud-monitoring service. Cloud-monitoring is a method of observing and managing the operational workflow of computers in a company. And DDOG is a market leader that dominates the cloud-monitoring sector. In fact, it’s known as the absolute best product in the industry.

DDOG is pretty much the Apple of cloud-monitoring, and they’ve enjoyed a swell in profits from the pandemic. The company has extremely high exposure to industries that have benefitted from the economic shutdown – places like streaming media, gaming, food delivery, and e-commerce websites.

Things are only looking good for DDOG, and that’s why I’m keeping my eyes glued to their earnings report. I’ll update you immediately with any major developments.

A Year of Challenges…

Ever since the beginning of quarantines and lockdowns in March, we’ve been inundated with articles, social media posts, etc. about various challenges you can do to pass the time.

Fitness challenges were very popular, and undoubtedly contributed to the increased demand Peloton saw during this time.

But of all the ones I heard of people undertaking, not nearly enough attempted the one I know of that can multiply your investment up to 10 times in just 4 months!

I’m talking about my friend Tom Gentile’s “Regular to Riches” challenge… and I can tell you that, compared to reading one book a week or doing 100 push-ups a day, the 5 minutes of work per week that “Regular to Riches” requires are a piece of cake.

Click here for all the details.

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