Welcome back to Stocks4Docs! Thank you so much for joining us. Today we’ll be discussing a company that’s frequently in the news- Peloton! This is a company that I personally love, so I am thrilled to be talking about it with you. Let’s get started.
We’ll start with the Circle of Competence. Is this company something that you are interested in? Is it within your capability of understanding?
To get a better idea, let’s take a look at what Peloton is.
Peloton is an interactive fitness platform that’s based on two streams of revenue. The first is their equipment- standing bikes and treadmills. The second is a monthly subscription service that gives users access to online classes.
This business model was excellent during COVID. It allowed customers to take live group classes from the safety of their homes, building a sense of community when many people were losing theirs.
This was a great model during the height of COVID lockdowns, but what about now? With gyms opening again, will people start to abandon their subscriptions in favor of in-person workouts? The bike is a rather large investment, and the subscription is an additional $40 per month. Without the subscription service, one might as well buy any other standing bike. It’s hard to say what will happen in a post-covid world, and this makes the moat questionable.
Peloton is still great for people in the medical field who work busy schedules, moms with small kids, or anyone who needs the option for a quick, at-home workout. It’s currently the largest interactive fitness platform in the world, and its classes stream in four countries.
Despite its rocketing success during lockdowns, Peloton has faced some issues that damaged its stock price. There was a recall on their treads after a few injuries that caused a slight dip in stock price, though it recovered just fine.
A few months ago Peloton announced that they were anticipating 3.6 million subscribers and $5.4 billion in revenue. A few months later, after the earnings reports came out, they revised these numbers to 3.4 million subscribers and $4.6 billion in revenue. Though this was still a 15% increase, it was a decrease in what they had previously anticipated. The revisions made wallstreet nervous, and the stock price dropped a whopping 36%.
Peloton is still a new growth company, not a value company. It has only been IPO for a few years now. It doesn’t have the same financial stability as other companies. Like many growth companies, Peloton has debt, negative ROIC, and ROE. This is just a part of investing in growth companies.
As far as the share price today, Peloton closed at $48.40. The all-time high peaked at $171, and the lowest price was $45. So Peloton stock is currently about as low as it’s been. Does that make Peloton undervalued at this price?
It comes down to whether you believe in the company and the product. There’s a difference between loving the product and thinking it’s a valuable stock option. Peloton is still growing year after year, and like many growth companies, that exponential growth will slow with time.
As far as management goes, Peloton is in a pretty solid spot. Their team is built of 22 people, 12 of which are women, and includes a Diversity and Inclusion Officer. That’s always great to see in management. Their CEO is John Foley, who is also the chair of their board. Foley is an engineer who’s also found success being a CEO for multiple companies, such as Barnes and Noble, in the past. Additionally, Foley is a triathlete, which is what prompted him to move towards Peloton.
The board is composed of 7 members with 2 women. It’s got a fairly diverse range of experience including venture capitalists and members of leadership from large companies such as Restoration Hardware.
If you believe in Peloton as a company, now is a great time to buy into it. As we discussed earlier, the stocks are currently near their lowest price point. If the company continues to grow, the stock price will recover, making this a great opportunity to get in while the price is still low.
Peloton is a great company to keep your eye on! What do you think? Is it worth investing in right now?
As always, please reach out with any questions, comments, or suggestions for future episodes! Thanks so much for tuning in, and we’ll see you again next week.
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