I hope you are enjoying your Thursday. Welcome back to a brand new Ask Ash, where I ask WatchMojo founder and CEO Ashkan Karbasfrooshan on various topics, ranging from what is going on in the news, to career advice for students and entrepreneurs.
Today is the first installment of talking about stocks and investing with Ash. Yesterday, he sent me a very interesting article talking about the “Hollywoodization” of Peloton and how the product has thrived during the pandemic in sales, and increased subscription rates. Additionally, Peloton has created an entertainment platform where 19 classes of scripted content are written each day and can emphasize things ranging from different messages about life, to classes that are focused on different types of music.
More on that article here: https://www.hollywoodreporter.com/business/business-news/hollywoodization-of-peloton-1234964386/
After reading this article, this got me thinking about the stock. As gyms are starting to reopen, and people are starting to get vaccinated, I wanted to get Ash’s opinion on the stock, and if he thinks the stock will fall or continue to thrive once people return to in-person workouts.
1) Do you think that the heavily scripted content on Peloton influences sales?
Historically companies differentiate themselves through unique offerings. As such it’s not so much whether heavily scripted content – the first of the 3 C’s – influences sales or not, it’s more that content is a great way to not only differentiate itself from the competition but it also leads to fostering a sense of community – the second C – which then lead to more commerce, ie the third and critical C.
2) Do you think that as gyms start to reopen and people return to the gym that we will see Peloton’s stock fall?
Disclosure: I own shares in PTON. Believe it or not, my initial inclination was to think that yes: once gyms open then people will be less inclined to use the peloton and thus overtime it’s stock would fall.
However I think that in speaking to peloton users, it’s clear that they’ve done a very good job of creating a community which bolsters retention.
More importantly, I’ve actually taken a contrarian view which says that: people will a) value their time more and not everyone will want to commute to and from the gym, or b) not share equipment with others, and so on.
Moreover, I think that peloton has done a very good job of expanding the total addressable market, or TAM, because peloton ultimately caters to a different user than someone who craves being in a gym around others and so on.
Finally in building community, offering content, and building goodwill – which is basically brand equity – I think that Peloton is in some ways like Netflix or Apple creating a whole different experience and brand affinity that goes above gyms, workout and health. It’s really moving towards lifestyle and a state of mind.
3) As Peloton has recently recalled their products and will lose $165 million in revenue, would you recommend being bullish or bear on the stock?
Again I see things very differently while the incident was tragic and indeed it would’ve been nice to see peloton react more swiftly I think companies could all use humbling experiences in this case I hope that peloton will in the future be more proactive and quicker to be reactive but ultimately indeed there’s a saying in investing that says “you want to be greedy when others are fearful, and fearful when others are greedy“.
As such, I remain bullish on the stock and company.
More Info About Peloton’s Stock:
Peloton Interactive $PTON
Peloton Interactive, Inc. was founded in 2012 and is headquartered in New York, New York.
Peloton Interactive, Inc. provides interactive fitness products in North America, Canada, United Kingdom, Germany and Australia,. It offers connected fitness products, such as the Peloton Bike and the Peloton Tread, which include a touchscreen that streams live and on-demand classes. The company also provides connected fitness subscriptions for multiple household users, and access to all live and on-demand classes, as well as the Peloton Digital app for connected fitness subscribers to provide access to its classes. It launched into Peloton Apparel and accessories with famous brands around the world.
Peloton is the largest interactive fitness platform in the world, with a loyal community of more than 4.4 million members. It could be termed as Connected Fitness as a Service. They have pioneered connected, technology-enabled fitness and the streaming of immersive, instructor-led boutique classes to our members anytime, anywhere. Peloton makes fitness entertaining, approachable, effective, and convenient, while fostering social connections that encourage our members to be the best versions of themselves. Their world-class instructors teach classes across a variety of fitness and wellness disciplines, including indoor cycling, indoor/outdoor running and walking, bootcamp, yoga, strength training, stretching, and meditation.
Financial Fitness of PELOTON
Brief Financial results Background of Peloton in 2019-20.
Continuous and Consistent results of Peloton.
Technical and Fundamental Analysis
We shall take a brief look at Peloton for its insane run in 2020.
Leisure products and services had a great run in 2020 owing to Covid19 Lockdowns and Stay at home orders. Of which, Peloton has stood the biggest winner of them all. It has showcased its powerful relative strength in all of its groups and subsequently the closure of gyms also fuelled its terrific growth in 2020.
Peloton is not just a ‘stay at home’ stock beneficiary. If not for its solid fundamentals, being a number one brand, product, service, stock in all of its categories and sectors, Peloton would not have that sensational rally and still be going great guns.
PTON reported quarter over quarter earnings growth of 259% and 211% over their most recent 2 quarters on the heels of losses for the 6 quarters prior. Conversely, PTON’s earnings have been fueled by massive quarter over quarter revenue growth over the past 8 quarters, which is a huge positive.
PTON broke out at $27.38 on March 30th,2020 and ran up to an all-time high of $167.37 on December 24th,2020 for a gain of 368% in 35 weeks.
PTON has yet to report a positive year of earnings. However, they lost much less in ‘20 than they did in ‘19, and the street is expecting enormous annual growth over ‘21 and ‘22. Currently, the street is looking for PTON to earn $0.35 in ‘21 vs a loss of $0.32 in ‘20, and their current estimate for ‘22 is $0.76, which would be an increase of 117%.
In the most recent Q2 2021, They reported 0.21 EPS so they are well on track to reach 0.35 and beyond 0.76 by 2022 end. Their reported Revenue for Q2 2021 is $1.06 billion.
Finally, institutional sponsorship in PTON has accelerated at an incredible pace over the last 6 consecutive quarters. The Vanguard Group and The Blackrock group are prominent among them. Also, Many flagship funds and ETFs hold positions in the stock as of their most recent quarter, especially ARK Funds of Cathie Wood.
Peloton’s auditor is Ernst & Young LLP.
Q2 2021 Shareholder Letter
Quarterly Report : 10-Q / Q2 2021
All the last four quarterly results of $PTON
Annual Report – June 30 2020
All SEC Filings
Top Stocks of 2020
$PTON in the top five in the elite club of $TSLA, $FVRR, $TWST, $ENPH.
A fitness company in the company of EV’s, Clean Energy, Biotechnology & an online free-lancing marketplace company which found its calling during a pandemic just like Peloton found its ride (rally) in 2020.
Software / Subscription Model integration
The idea behind products/services/experiences that integrate software and a subscription model to deliver value to the end customer. Peloton is ruling the roost in the connected fitness sector
This graphic below says it all.
Peloton offers Valuable & Differentiated Products with their brilliant business model.
Its combination of hardware and software offers a superior ‘price to value’ ratio
- the service isn’t pay-per-use, resulting in superior costs per workout to studio classes (better price)
- Peloton provides higher-quality and more convenient fitness experiences relative to gym subscriptions (better value)
The net effect is that Peloton’s offerings have better value proposition relative to competitors, by way of a better price, value, or both and is enabled by the integration of hardware and software.
Playing into this, Peloton offers a “calculator” to compare your fitness options which is so fun to play around and see what comes up.
Sticky Customers are happy customers for the brand and its products. Because of the value and differentiation of products, customers love them and want to continue using them. But in addition to a love for these products, there is also a stickiness that comes with a physical product.
Peloton created a new ecosystem and its own niche sector of Connected Fitness and deservedly it is a category leader with its competitors.
Additional recent articles?
Top 10 Reasons to be Bullish on Peloton.
1) Adidas x Peloton
2) Peloton CEO on Fox TV earlier in March. You just have to love his confidence! I also just love the fact that there is a peloton bike right behind him all through the interview and Chris Wallace makes a comment about it as well.
3) Beyoncé x Peloton & Beatles x Peloton
Beatles x Peloton
4) Net Promoter Score ( NPS ) of Peloton beats Starbucks and Apple by a huge margin. Peloton $PTON has 94 whereas $SBUX has 77 & $APPL has 67
Net Promoter Score is the percentage of customers rating their likelihood to recommend a company, a product, or a service to a friend or colleague as 9 or 10 (“Promoters”) minus the percentage rating this at 6 or below (“Detractors”) on a scale from 0 to 10.
5) Shondaland x Peloton and Timbaland x Peloton
Shonda Rhimes is a American Television Producer, Screenwriter and Author. Famous works such as Grey’s Anatomy & the latest Bridgerton.
Timbaland ( Versuz)
6) Peloton acquires Precor to resolve their delivery issues & other hiccups. It completed the Acquisition on April 1st.
7)Peloton launches in Australia, marking the interactive fitness brand’s entry to Asia-Pacific Region. It has already made its mark in the USA, UK, Canada & Germany.
8) Peloton Is the Number One of the Innovative Wellness company and Number Two of the Top 10 Brands of the United States. #BrandRelevanceIndex.
Number 1 Innovative Wellness Company
Top 2 USA Brand
9) Apart from all this, Peloton has had partnerships with Academies, Health Insurance, Media companies such as Spotify, 3rd party integrators such as Fitbit, Strava, Fintech companies such as Affirm, Klarna etc, Apparel tie-ups with Nike, Lululemon and finally hospitality industries such as Marriott, Westin to name a few.
10) Finally, Mr. Joseph Biden – 46th President of the United States of America – Rides a ‘Peloton Bike’ in the morning.
Peloton was named in the inaugural TIME100 Most Influential Companies list. This recognition is a testament to their team’s unwavering commitment to better the lives of millions around the world through fitness. #TIME100Companies
World Class Usain Bolt ⚡ and Tennis champion Angelique Kerber are some of the few names that are endorsing Peloton.
Here is the official news,
Peloton, get ready to train like never before. Join these nine elite athletes from our global Peloton community as they ride, run, flow, sweat and push themselves alongside you, and motivate you to train like they do. This is the #ChampionsCollection.
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