Q: Any thoughts on Peleton as an investment?
My understanding is that they are not yet profitable, but they are still expanding their exposure in North American households through an increase in their subscriber base. A recent BNNBloomberg article also indicated that they have made plans to improve the breadth of their exercise machine catalog, through offering multiple price points on the exercise bicycles that they sell (I also see that they sell treadmills in the US, but it seems as if they have not added this as a purchase option on their Canadian website at this time), as well as potential plans to offer rowing machines in the future. I have read separately that they made a recent purchase of a Taiwanese company by the name of Tonic, in order to secure their supply chain for equipment, and that they have established a relationship with a company by the name of Affirm, in order to offer monthly payment plans for their equipment.
The company is now trading at $27.86, about 4% below its IPO price of $29. I would imagine that the most meaningful revenue source for Peleton would be from its subscription base rather than its equipment sales, as subscriptions are recurring and maintaining video/interactive conent would probably not require as much in terms of input costs per dollar of revenue as would manufacturing exercise machines for sale.
My main concerns regarding this company is that the potential for competition is profound (both in terms of manufacture and sale of equipment, as well as in their subscription program for fitness training). On the positive side of things, they have built up brand recognition and loyalty, which is not easy; and goodwill is an important part of any company's valuation.
I would be using the proceeds from the sale of my holdings in Cineplex to fund this investment (about 2% of portfolio), so it would not change my exposure to the Consumer Discretionary sector.
As always, I look forward to your response. Thanks so much!
My understanding is that they are not yet profitable, but they are still expanding their exposure in North American households through an increase in their subscriber base. A recent BNNBloomberg article also indicated that they have made plans to improve the breadth of their exercise machine catalog, through offering multiple price points on the exercise bicycles that they sell (I also see that they sell treadmills in the US, but it seems as if they have not added this as a purchase option on their Canadian website at this time), as well as potential plans to offer rowing machines in the future. I have read separately that they made a recent purchase of a Taiwanese company by the name of Tonic, in order to secure their supply chain for equipment, and that they have established a relationship with a company by the name of Affirm, in order to offer monthly payment plans for their equipment.
The company is now trading at $27.86, about 4% below its IPO price of $29. I would imagine that the most meaningful revenue source for Peleton would be from its subscription base rather than its equipment sales, as subscriptions are recurring and maintaining video/interactive conent would probably not require as much in terms of input costs per dollar of revenue as would manufacturing exercise machines for sale.
My main concerns regarding this company is that the potential for competition is profound (both in terms of manufacture and sale of equipment, as well as in their subscription program for fitness training). On the positive side of things, they have built up brand recognition and loyalty, which is not easy; and goodwill is an important part of any company's valuation.
I would be using the proceeds from the sale of my holdings in Cineplex to fund this investment (about 2% of portfolio), so it would not change my exposure to the Consumer Discretionary sector.
As always, I look forward to your response. Thanks so much!
