FINANCE TODAY | ISSUE NO.11
A NEW PLAYER IN THE FITNESS INDUSTRY
For years, fitness companies have based their business models around opening several locations for gyms offering state of the art equipment and unique classes led by qualified instructors. Peloton Interactive on the other hand has been attempting to stray away from the traditional business model and encourage consumers to engage in personal fitness activities by bringing this gym experience to the comfort of their own homes. This idea sparked the inspiration for their flagship product, the Peloton Bike. The current popularity of at-home fitness and demand for at-home equipment has provided Peloton with the boost needed to further expand their business. Peloton is now reducing the price of the original Peloton Bike and introducing two new products. This will be the company’s first expansion since being founded in 2012. What now remains to be seen is whether or not Peloton will be able to ride this upward trend and how long.
Peloton Interactive will also be introducing the Peloton Bike+ as their high-end version of the original model. The Peloton Bike+ will boast a variety of new features such as improved speakers which the company hopes will attract and retain the high-end market the original Peloton Bike once held. The Peloton Bike+ includes a 23.8-inch LCD screen that sits on a rotating arm, allowing users to participate in classes that do not necessarily involve the bike itself since Peloton also offers classes geared towards muscular strength and endurance. Another major feature that the new model boasts is support for Apple GymKit, which allows for Apple Watches to connect to third-party fitness devices. This means that Apple Watch users are able to use the watch’s heart rate sensor rather than a chest strap when working out using the Peloton Bike+ (Williams, 2020).
The final product which Peloton Interactive plans to release is the new Peloton Tread, a cheaper version of the current Peloton Tread (now named Peloton Tread+). The Peloton tread includes a 23.8-inch HD touchscreen which is able to tilt similar to the Peloton Bike+. The new treadmill has a smaller design in order to fit easily in users’ homes and lacks the front shroud commonly found in most treadmills. All of Peloton Interactive’s new products will be released as of September 9th, 2020 with the exception of the Peloton Tread, which will be released on December 26th, 2020 in the United Kingdom. The treadmill currently has an early 2021 release date for Canada and the United States.
WHAT LIES AHEAD FOR PELOTON INTERACTIVE?
2020 has been Peloton Interactive’s most successful year yet, as indicated by the quarterly revenues from the past two years shown above. The company experienced significant growth come quarter 2 of 2020, showing an astounding 104.5% increase from quarter 1 of 2020. This quarter, Peloton is expected to report actual earnings of US$0.10/share on US$566.63 million in revenue, a 21.5% increase from the previous quarter. (Sarhan, 2020). Peloton will have reported its actual earnings on September 10th, after the NASDAQ’s close. If their actual earnings are anywhere near the reported estimates, then the future will continue to look bright for Peloton shareholders.
What remains to be seen is whether or not Peloton Interactive will be able to maintain this into the near future. This will heavily depend on the longevity of the at-home exercise trend alongside the ever-looming threat of competition from much larger organizations. With a COVID-19 vaccine not expected until next year and public skepticism of gyms lingering, it is unlikely that the trend of at-home exercise will be disappearing anytime soon, and may still be growing in terms of popularity. As for competition, their current biggest threat comes from Apple, as they announced their plans to launch a new subscription service for digital fitness classes via an app for the iPhone, iPad and Apple TV (Klebnikov, 2020). Although initial reports of this subscription service caused a decline in Peloton’s stock, they quickly recovered as analysts predicted that the company would be Apple to hold onto its top spot in the virtual fitness realm.
Peloton’s combination of hardware and software to create an interactive fitness experience has been seen as revolutionary. Unless Apple has plans to release a companion product in conjunction with the subscription service, their efforts would do little to slow the pace of Peloton’s growth. However, there is always the possibility that Peloton is bought out by Apple as they are a much larger company. James Hardiman, a managing director of equity research at Wedbush states, “Why would the Big Techs bother going down the same path that took Peloton five years to get here, especially when they could just buy Peloton outright?” (Klebnikiv, 2020). No matter the outcome there still seems to be a prosperous future ahead for Peloton interactive.
Hansen, S. (2020, September 08). Here’s Why Peloton Stock Is Soaring 10% Today. Retrieved September 10, 2020, from https://www.forbes.com/sites/sarahhansen/2020/09/08/still-want-a-peloton-for-quarantine-its-about-to-get-24-cheaper/
Klebnikov, S. (2020, August 14). Could Competition From Apple Derail Peloton? Not So Fast, Analysts Say. Retrieved September 10, 2020, from https://www.forbes.com/sites/sergeiklebnikov/2020/08/13/competition-from-apple-wont-derail-peloton-analysts-say/
Sarhan, A. (2020, September 03). Earnings Preview: What To Expect From Peloton On Thursday. Retrieved September 10, 2020, from https://www.forbes.com/sites/adamsarhan/2020/09/08/earnings-preview-what-to-expect-from-peloton-on-thursday/
Williams, A. (2020, September 08). Peloton Bike Adds Four Crucial Features, One Just For Apple Watch Owners. Retrieved September 10, 2020, from https://www.forbes.com/sites/andrewwilliams/2020/09/08/peloton-bike-adds-four-crucial-features-one-just-for-apple-watch-owners/