Peloton’s (PTON) stock closed down 11% after its first day of trading, spooking some investors and prompting at least one analyst to suggest that the fitness brand known for its high-end stationary bikes should sell itself to a bigger retailer.
Peloton labels itself as a variety of different things: an exercise, tech, software, design, and retail company. But in order to capitalize in these categories, John Meyer, Managing Partner of Starship Capital, believes it has a ways to go. “Peloton is a company that doesn't yet have a robust retail exposure,” Meyer said. “And so without that, it's very difficult to sell these things unless there are stores everywhere where people can try them.”
That equipment is pricey: Internet-connected bikes start at $2,245 while treadmills run $4,295. Because of these high costs, Meyer suggested that Peloton align itself with another brand known for high-end hardware: Apple (AAPL).
“One of my views is that Peloton would be much better off selling to a company such as Apple where they're another luxury brand that has retail stores everywhere and could really do a good job at getting people to actually try to use them and buy them on the spot,” said John Meyer, Managing Partner of Starship Capital.
In addition to the costs of Peloton’s hardware, users must pay an additional monthly $39.00 content subscription fee. The company more than doubled its revenue to $915 million for the year ending in June, but that growth might not hold up if a recession hits.
“When you're selling these expensive devices, the first thing people are going to stop buying if we hit a recession are these luxury, high-end devices,” Meyer said. “And so I think that's another key attribute that's going into the investor decision making here at this point.”