Can I Buy Peloton Stock?

How did Peloton grow from a Kickstarter idea to a multi-billion dollar public company? Like for most companies, timing is essential and is a huge difference-maker. Can the company live up to its hype and survive a post-pandemic world? Let’s take a look at this Peloton stock story.

Peloton Stock Story (NASDAQ: PTON)

Peloton Stock

Peloton’s story began just over a decade ago, in January 2012. Their idea was simple. Bringing studio cycling into your home and creating an online community of cyclists.

After releasing its initial bike, Peloton released a variety of other merchandise. More on that later. Following a successful Kickstarter campaign in 2012, Peloton released its first prototype in 2013.

The idea of having your own biking studio at home and being able to compete against friends and strangers quickly became appealing to many.

The competition aspect of the brand was a huge success. Many news outlets picked up the story of Peloton and joined the hype. 

In September 2019, Peloton went public. The company was given a unicorn valuation due to its potential market size.

Since then, its growth exploded. Some attribute its growth to the pandemic. As we all know, it became increasingly difficult to work out in gyms.

Many turned to the online platform to be able to exercise from home. Is the hype sustainable past the pandemic? Below are some key statistics highlighting Peloton’s future lookout.

Stats

Peloton is available in the US, Canada, Germany, and the UK. What are Peloton stock stats? Let’s take a look.

Revenues began increasing with the start of the pandemic, but have been falling since many restrictions have been lifted. Revenues increased, however below expectations, in the last quarter with the reintroduction of restrictions.  The CEO and 2,800 other employees (20% of the workforce) were laid off following the last earnings. Are they a glimpse into Peloton’s future quarters?

Q2 2021: $1.064B

Q3 2021: $1.262B

Q4 2021: $936.9M

Q1 2022: 805.2M

Q2 2022: $1.13B

Profits are still nonexistent since they became public. Peloton spent a lot of money on celebrity appearances, renowned coaches for their platform, and music for their workouts. Partners include Jay-Z, Meghan Trainor, Beyonce, and instructors such as Cody Rigsby (1M Instagram followers) and Robin Arzon (940K Instagram followers). Users could work out with their favorite artists and with their favorite trainers. 

2019: ($246M)

2020: ($72)

2021: ($189M)

Subscribers Increasing

On a positive note, the number of subscribers has been steadily increasing each quarter. Their retention rate is an outstanding 96%. Users have been loyal to Peloton, but since gyms reopened, many went back. Two-thirds of their users are between the age of 25 and 44. 

Many users might seek to split their workout time between a conventional gym and the Peloton platform. Human interactions will remain an important component of a successful workout, but the online competition is unique. Peloton will have to decrease its spending in order to eventually become profitable. Its stock is currently under $30 after hitting over $160 in December 2020. Investors fell off the hype train since. 

News of Amazon and Nike potentially buying Peloton drove the stock up 25% in the pre-market on Monday, February 7th. Peloton is an attractive buying opportunity for both giants and their existing customer base. Now may be an excellent time to get in the stock. Amazon and Nike can reduce costs and bundle the products below with their existing lines. Peloton can become the next Kindle for Amazon.

Bikes and Accessories

The Peloton Bike is connected to the internet and allows users to compete with friends and strangers with a touchscreen. The cost of the basic bike is $1,495. The Bike + comes with a fully immersive technology and added features for cyclists seeking a more realistic home workout. The cost is $2,495 including delivery and setup.

It is possible to bundle the Bikes with accessories such as cycling shoes, light weights, dumbbells, a bike mat, a reversible workout mat and a heart rate band for an additional cost. Peloton also offers financing on their items.

Users are generally very satisfied with the quality of the product, which explains the cost of the equipment. The Tread is also available with the same optional accessories as the Bike. The starting price is $2,495 + $350 in delivery and setup fees. 

The price of a regular stationary bike and treadmill will definitely be inferior. What sets peloton apart from the rest is their unique competition model and the quality of their products.

Membership

Membership is required in order to access all the classes (cycling, running, strength, yoga, stretching, and more). Similar to Netflix, users can create an individual profile for all family members. 

Peloton offers a variety of apparel for its users. Items include leggings, shorts, hats, tank tops and many more.

Peloton Stock Infrastructure

Peloton has 78 showrooms across the US and Canada as well as 12 in Germany and the UK. Customers can have a personalized walkthrough and a class trial. Many customers can immediately become sold on the Peloton idea.

Unfortunately, these showrooms also come with a big monthly bill. The last earnings call provided investors with some information about the future of these warehouses. The new CEO claimed that many of them will close soon, which will save hundreds of millions of dollars.

Review

As we can see above, the company has a variety of revenue streams. They are able to capitalize on the loyalty of their members. Unfortunately, their expenses are too high and they have issues with production capacity and times.

If Amazon or Nike decide to save the company, they will be sure to reduce expenses and optimize the supply chain. They can also expand Peloton’s footprint globally. Four countries are not enough for a public company. In order to dominate the exercise from the home market, Peloton must expand.

Peloton Stock Alternatives

Peloton Stock

Peloton’s story and strategy may be one of a kind, but its business model is certainly not one of a kind.

Many gyms with an existing customer base can create their own merchandise for a home workout.

We saw a lot of people looking into working out at home. Especially lately.

As a result, that could hurt gyms. But it’s great for companies like Peloton who thrive off of home workouts. Are there other companies who can compete with them?

Below are two public companies that can compete with Peloton.

Nautilus, Inc. (NYSE: NLS)

Nautilus has been around for over 30 years. They have physical locations in over 80 countries. Retailers such as Costco, Amazon, Sears, and others sell their products. The company also capitalized on home workouts during the pandemic. Nautilus owns household brands Bowflex, Schwinn, and others. Their affiliates have a wider range of equipment than Peloton (stationary bikes, treadmills, ellipticals, rowing machines, and home gyms) as well as online applications.

The pandemic certainly affected Nautilus’ physical locations. However, their online sales have been solid. 2020 was a record year in terms of revenue and net income. Their stock has been a roller coaster over the last 3 years. Fortunately, there is room for improvement. They have a solid customer base, quality equipment and they are a global brand. 

With the restrictions slowly disappearing once again and the home workout trends, Nautilus is well-positioned for the future. Their stock is currently under $5, well short of its 52-week high of $30. Additionally, market capitalization is below 2020 revenues. This makes it a very attractive stock for investors.

Planet Fitness Inc (NYSE: PLNT)

Peloton Stock

Planet Fitness has been trending in the opposite direction recently.

Unlike Peloton and Nautilus, their stock is almost at an all-time high. What is the reason for their success?

First, Planet Fitness leases its stores. They have over 2000 locations across the US, Canada, Mexico, Panama, the Dominican Republic, and Australia.

However, only 80 gyms are corporately owned. The rest are all franchises.

Owners must pay $30,000 in initial fees and a 7% royalty on gross monthly and annual membership fees. 

Second, membership fees are among the lowest in the world. Revenues were constantly increasing from 2010 to 2019 but declined in 2020. Nevertheless, membership growth is back on track for consecutive quarters. Management wants to start charging for the mobile app which has seen an increase in popularity.

Lastly, Planet Fitness sponsored ‘’The Biggest Loser’’ since 2012. They provided their equipment, locations, and instructors for the show. They also partnered with 50 Cent for his energy drink. Planet Fitness also works closely with the ‘’Boys and Girls Club of America’’.

Their strategic partnerships increased their presence worldwide and boosted the credibility of their brand.

They decided not to invest in home gyms for the moment. A lot of athletes like the gym atmosphere and the company is banking on that. Entering the home gym movement can be risky unless they are willing to acquire an existing brand.

Planet Fitness stock is currently sitting $10 shy of its all-time high of $99.60. Analysts are bullish on a post-pandemic recovery and the stock is worth a closer look.

Peloton Stock Conclusion

To conclude, Peloton stock has been very successful in a COVID world. Once things go back to normal, gym rats might ditch the home workout. Peloton has to find a way to adapt to be able to survive. They are currently seeing offers from Nike and Amazon for a buyout. Alternatives to Peloton do exist but only lack the competition feature.

Personally, I prefer working out without a coach or a leaderboard and at a gym. If the pandemic ever ends, we will be able to see if others agree with my views.

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