Background
Peloton is the largest interactive fitness platform in the world. It combines exercise equipment with an interactive digital experience featuring energetic trainers to motivate customers to stay fit.
Peloton is one of the pandemic businesses that took off during lock-downs, causing people to cancel their in-person fitness subscriptions and find solutions to work out at home. That has caused a backlog of equipment orders that grew from $360m in June 2020 to $520m in September 2020.
Peloton's business model is built on not only the sale of high quality exercise equipment, but also the continuation of subscription payments from customers. Growth of the subscription base largely depends on the delivery of exercise equipment to customers.
So when Peloton released Q1 earnings in November, investors became nervous with the increasing backlog of equipment orders. News on the street said customers are complaining and starting to abandon orders that are taking over 10 weeks to arrive in some cases. If customers cancel orders, they also do not turn into subscribers.
On December 21, Peloton announced it would acquire fitness equipment manufacturer Pecor. Typically a company announcing an acquisition will drop in stock price. But Peloton gapped up on December 22, gaining 11.65% for the day.
Pecor brings two huge benefits for Peloton that investors love. One is increased manufacturing capacity to improve delivery times on equipment orders. The other is to plug Pecor's existing customer base into Peloton's world-class fitness content, accelerating subscription growth.
Fundamentals
Technical
PTON is a little too extended to buy. Best to wait for a pull-back or high, tight flag and look for a proper entry.
Peloton is the largest interactive fitness platform in the world. It combines exercise equipment with an interactive digital experience featuring energetic trainers to motivate customers to stay fit.
Peloton is one of the pandemic businesses that took off during lock-downs, causing people to cancel their in-person fitness subscriptions and find solutions to work out at home. That has caused a backlog of equipment orders that grew from $360m in June 2020 to $520m in September 2020.
Peloton's business model is built on not only the sale of high quality exercise equipment, but also the continuation of subscription payments from customers. Growth of the subscription base largely depends on the delivery of exercise equipment to customers.
So when Peloton released Q1 earnings in November, investors became nervous with the increasing backlog of equipment orders. News on the street said customers are complaining and starting to abandon orders that are taking over 10 weeks to arrive in some cases. If customers cancel orders, they also do not turn into subscribers.
On December 21, Peloton announced it would acquire fitness equipment manufacturer Pecor. Typically a company announcing an acquisition will drop in stock price. But Peloton gapped up on December 22, gaining 11.65% for the day.
Pecor brings two huge benefits for Peloton that investors love. One is increased manufacturing capacity to improve delivery times on equipment orders. The other is to plug Pecor's existing customer base into Peloton's world-class fitness content, accelerating subscription growth.
Fundamentals
- Sales YoY growth of 66%, 172% and 232% last three quarters
- EPS of -0.20, 0.27 and 0.20 last three quarters
- Tripled # of funds since previous year
- Subscription growth is 137% YoY previous quarter
- Monthly Subscription Churn is 0.65%
Technical
- 829% price increase since March lows (427% YTD)
- 71.24% from gap-down low on 11/9
- 26% to 50d MA
PTON is a little too extended to buy. Best to wait for a pull-back or high, tight flag and look for a proper entry.