It’s known for offering an alternative to the gym, getting couch potatoes off the sofa and for having over 4.4 million individuals worldwide including celebrities like Richard Brandson, Jimmy Fallon, Kate Hudson and the Obamas sweating it out on its bikes and treadmills. But unlike faddish exercise manias that have come and gone, Peloton has become a household name and a worldwide fitness phenomenon, with a million impassioned users to whom its bikes and original streaming workouts are a way of life.
With its wide scope and unlimited potential, the home fitness equipment provider’s business has boomed in the wake of the COVID-19 pandemic as people have scrapped their gym memberships and started exercising from their homes. Selling more than 500,000 fitness machines to date, workouts have quadrupled from 19.2 million to 77.8 million over the same period, underscoring the rapid growth for the company as more and more people took to its fitness programmes.
A brief history of Peloton
Established in 2012 and launched with the help from a Kickstarter funding campaign in 2013, Peloton was founded by John Foley an avid cyclist and boutique fitness lover, together with Graham Stanton, Hisao Kushi, Tom Cortese and Yony Feng. A fan of spin studios, Foley found it increasingly difficult to balance working out and the commitment of family life. As a result, he leveraged his tech and business experience to create Peloton, a technology company that brings fitness and media together and high energy workouts right into peoples’ homes. Essentially the company produces stationary bikes and treadmills equipped with screens for users to join live and recorded fitness classes remotely.
Its first stationary bike was released in 2014, while as recently as September 2020, it rolled out an upgraded version, the Bike+ boasting a large, swivelling screen, auto-follow resistance, more speakers and an Apple GymKit integration. Classes are recorded on a daily basis and streamed live from Peloton’s cycling studio located in Chelsea, Manhattan, after which they are uploaded to the Peloton library for on-demand access, anytime. Prior to the onset of the COVID-19 pandemic, the studio was open to the public for walk-in style classes, however, as of April 2020, instructors have been streaming classes from their homes in what they have dubbed ‘Live from Home’.
In 2018 it introduced the Peloton Tread and Tread+, the company’s treadmill products. The machines feature a 32-inch touchscreen and sound bar mounted at the front. The same year, Peloton announced its plans to expand into Canada and the UK, while it acquired Neurotic Media, a music distributor. The Peloton Digital app is its monthly subscription service that allows users to stream the company’s classes on iOS and Android devices. Classes are not limited to cycling though. Strength, yoga, cardio, meditation, running, stretching, boot camp, barre and walking classes are also available.
The company’s moniker comes from the French word for platoon. In a road bicycle race, the peloton refers to the main pack of riders. By riding close to each other, they can save energy. Whilst Peloton fans don’t physically ride together, they do attend classes together remotely, showcasing a sense of comradery.
When did Peloton go public?
Peloton went public in 2019 in a widely anticipated IPO, raising $1.16 billion and floating 40 million shares of class A common stock at $29 per share – at the top end of its target range. Shares began trading at around $27 per share and then continued to drop over the course of the day, closing down by more than 11%. Yet, after three consecutive quarterly earnings reports showcasing robust revenue growth, the stock has soared.
How much would an investment in Peloton’s IPO would be worth?
With a $5,000 investment in Peloton’s IPO, you would have purchased nearly 172 shares which would now be worth approximately $25,195. Bearing in mind that this is just a one-year return, it is quite impressive. If, on the other hand, you had purchased stocks during the market crash back in March 12, 2020 when the stock briefly dipped below $20 and purchased $5,000 worth of Peloton stock, your investment would currently have a market value of $37,450. That would have more than sufficed for you to purchase a Peloton Tread+ that sells at around $4,256 and a Bike+ at $2,495.
Is Pelton a buy?
As businesses both large and small operating in all sorts of sectors are taking the brunt of the COVID-19 pandemic, 2020 has proven to be a year to remember for Peloton. Stay-at-home orders brought on by the pandemic and the closure of brick-and-mortar gyms have paved the way for an excellent performance, with sales of its high-tech bikes through the roof, marking a 232% surge in November 2020. Its subscriber base surged at a triple-digit rate, while online searches for ‘Peloton’ almost tripled since the end of February 2020.
But it’s not just about the bikes, treadmills and subscriptions that have made Peloton a success story. The value proposition for the company stems from the convenience of being able to take a studio cycling class on a bike at home whenever it suits your fancy, coupled with access to motivational instructors, a community of supportive yet competitive users and a choice of both live and on-demand classes is hard to pass. Then, there is the network effect. Peloton minimizes the isolation that comes from working out at home. In contrast, you can ride together with your friends and family over video chat, race and compare achievements and send each other digital high fives.
What’s more, Peloton has worked hard at building their instructors into their brand, with many amassing an impressive following. For instance, Robin Arzon, who is both an instructor and the brand’s vice president of fitness and programming has a 662,000 following on Instagram. The company also offers an array of accessories such as its Velcro-strapped bike shoes, bike weights, heartrate monitors, headphones and water bottles that make the whole Peloton experience complete.
And as a result of increasing revenues and subscriptions, the fitness company’s stock has also skyrocketed, gaining over 400% since its inception. On January 13, 2021 it hit an all-time high trading at $167.42, while Peloton’s market cap is that of $42.75 billion.
What’s next for Peloton?
In December 2020, Peloton announced that it is purchasing Precor, a global provider of commercial fitness equipment for $240 million, a move that will help boost its production capacity when it comes to the flood of orders it has been receiving more recently. The transaction will also allow the brand to expand both its product and customer base.
According to Foley, the company aims to have 100 million paying subscribers one day. Although a far stretch from its current paying subscriptions, Peloton has plenty of room to grow. Even prior to the crisis, it was growing at an incredible rate, with revenue more than tripling between 2017 and 2019. The company aims to achieve this monumental goal through US growth, product innovation and greater affordability of its products, as well as geographic and digital expansion. Its app is already available on major platforms such as Amazon Fire TV, Apple TV, Rokku and Andoid TV, which means that subscribers can access their workouts from just about anywhere. And with interactive fitness being all the rage, Peloton should maintain its momentum even once the economy reopens and people return to the gym.
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