Peloton Inc

  • Exchange: NASDAQ
  • Ticker: PTON

Peloton is a leading provider of at home exercise equipment and lie-streamed classes.


Peloton

February 28, 2021

Update - In the last two weeks, the market has seen large amounts of money leave the stocks that benefitted during covid to names that should benefit during a re-opening of the economy. One casualty of this has been Peloton, which has seen its stock drop by almost 30% from its highs. Like Freshpet, Peloton has suffered from capacity issues. The growing brand has had such strong demand that waiting times for its products have increased. They continue to expand their production capacity, in particular looking to expand production within the US (home factories). They acquired Precor for $420m. Precor is an incumbent in the market that offers gym equipment across a large range of commercial properties (think hotels, etc). Through the purchase of Precor, Peloton will get access to 625,000 square feet of manufacturing capacity within the US. They will also offer the Peloton experience across the commercial sites (exactly how, more details to be supplied).

In the meantime, Peloton has continued to announce excellent growth numbers. Total revenue grew 128% and is now over $1b for the quarter. Connected subscriptions grew 134%. Churn held at 92%. Average monthly workouts of 21.1. Whilst this company may see some slowing down as gyms re-open, it has capitalised on the opportunity it was given and grown its brand and community significantly. Even with the 30% decline, the company is still up 55% from when I first mentioned it in edition 7 of the newsletter (6th September). So this stock is still in an uptrend over the course of the year. If this stock was on your watchlist, the current dip might be an interesting buying opportunity if you have a long-term mindset.

peloton stock price

Peloton

September 06, 2020

Thesis - Peloton is a leader in at-home fitness technology. They sell hardware products (bike, treadmill) alongside a fitness subscription which enables customers to exercise from home led by instructors from Peloton’s studio. At first glance, Peloton’s expensive products ($2,200+ bike) might have you think the company is restricting its market to a small segment of high-earners. However, its digital membership is priced at an accessible $12.99 a month (recently lowered) and opens up its ecosystem to a broader range of customers. Both parts of the business are growing impressively and they have achieved really strong brand positioning. I’ve heard people discuss Peloton as the “Apple of Fitness” but as its streaming subscription grows, you might also consider it the “Netflix of Fitness” too.

Financials & Performance - For Q3 2020, they announced revenue growth of 66% and growth in paid digital subscribers of 64%. Impressively, 12-month retention is 93%. This highlights the stickiness of their service, especially when you compare to ordinary gyms where people frequently cancel memberships after just a few months. The company is not yet profitable, investing heavily in growth and expansion, but it does benefit from the current macro environment, with its home workout solutions particularly attractive whilst ordinary gyms are closed or restricted.

Opportunity - More products, more classes, more countries. Peloton recently announced it would be broadening its product range, with an additional bike and treadmill (one cheaper, one more expensive). It also continues to increase its content, offering more varied classes. Finally, Peloton has expanded to the UK and Canada after growing in the US and could expand further in the future.

Final point - I always like businesses that feel like a win for all it constituents. In the case of Peloton, this note about how it treats its trainers feels important. Peloton’s customers feel good for getting fit, their trainers are well looked after and becoming celebrities in their own right and the business succeeds as both its customers and trainers do.

peloton messages