But the founder of Peloton, John Foley, says Peloton sells happiness. The company state they are more than just bikes and refers to itself as a technology, media, software, product, experience, fitness, design, retail, apparel, logistics company. From the get go, Peloton was all about selling the bike then deploying the razor blade model of monthly subscriptions.
As shelter in place mandates have either bankrupted gyms or forced temporary closures such as the case with Planet Fitness, Peloton has flourished. Peloton’s revenue increased 66% last quarter as more people purchased its fitness equipment and tuned into its live classes. And if you can’t afford the bike, now sweat, Peloton offers non-bike classes as well. As a result, Peloton raised its 2020 outlook for paid subscription to 1 million from 925k.
But is Peloton’s ride about to come to an end or is there room for the 800 lb gorilla? Peloton’s stock has declined four straight days at one point due to concerns that Apple was developing a new subscription for virtual fitness classes.
Apple is reportedly gearing up to unveil Apple One, a series of bundles that will let customers subscribe to several of the company’s digital entertainment and productivity offerings at a packaged-up monthly price.
The company also is developing a new subscription for virtual fitness classes that can be used via an app for the iPhone, iPad and Apple TV, according to Bloomberg.
Code-named “Seymour,” that service will be offered in a higher-end bundle designed to entice users of other virtual classes offered by Peloton and Nike (NKE) - Get Report.
Going into the Fall, the continued concern surrounding COVID-19 will continue to benefit Peloton. I for one just canceled my Planet Fitness membership and set up a gym in my garage. But it’s worth noting, Peloton is still losing money. Since their IPO Peloton has been losing money and the only way to profitability is to grow it subscription base. For example, Peloton’s net profit margin is -14% over the last 12 months. Potentially standing in Peloton’s way will be Apple One which will debut in Oct to over 500 million current paid subscribers.
Whether Apple One is a threat or not, Peloton’s stock is up over 200% this year. So is a correction warranted…the Smart Money thinks so? Today the Smart Money bought over 45,000 of the January put options at the $30 strike price.
Actually the activity looks like a spread trade. Nevertheless, the Smart Money is expecting a 50% decline from current price...which is huge. I think on Monday, I'm going to jump in with the Smart Money.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
