Peloton Shares Climb 6% on New Offerings. Can It Keep Winning?

September 9, 2020

Peloton Interactive Inc (NASDAQ: PTON), the home exercise equipment firm, saw its shares pop as much as 10% on news of new product offerings and lower pricing. Shares ended the trading day up 6.2%

Tim’s Take:

For those of us unfamiliar with the company, Peloton has been a cultural phenomenon in the US so far this year. The company produces stationary workout bikes and treadmills that allow users to take part in online-streamed classes, all from the comfort of their home.

The company charges a monthly subscription – for the classes – in addition to the (rather expensive) one-off cost of purchasing the firm’s bike or treadmill.

The shares popped yesterday on news that the company would be offering a new Peloton Bike+ for the princely sum of US$2,495. 

It also plans to knock off US$100 from the price of its current bike, with the new price tag still coming in at US$1,895.

In terms of its overall business, Peloton has an incredibly loyal following. In its latest reported quarter (for the three month ending 31 March 2020), it had over 176,000 paying members, which was 64% higher year-on-year.

Revenue was up a similarly impressive 66% year-on-year. Admittedly, the business has a great model – get people to buy the bikes or treadmills, then keep them paying on a subscription basis.

Biking into the future

Shares of Peloton have already tripled year-to-date and are up nearly 150% since its last earnings report in May. 

I feel the company has yet to prove whether it’s sustainable business and not just a “fad” that’s going to pass once the Covid-19 pandemic lockdown scenarios pass.

It’s also still loss-making, with its net loss having actually widened in its latest quarter. The company will report its latest set of earnings on Thursday.

Expectations are sky-high for this stock and I’m not yet sold on the product’s stickiness – especially given the ridiculous costs of the actual equipment. 

It’s definitely one to watch in the future but investors should remain wary – even an earnings report that blows away Wall Street may not lift shares that much.

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Tim Phillips

Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth.

He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. He is also a certified SGX Academy Trainer.

In his spare time, Tim enjoys running after his two young sons, playing football and practicing yoga.

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