Peloton (PTON) is popular because it’s pioneering a new industry of sorts, explains growth stock expert Mike Cintolo, editor of Cabot Top Ten Trader.
Peloton bills itself as the largest fitness platform in the world, allowing members to access (via a big screen attached to their equipment) live or recorded instructor-led classes. It’s literally like being in a quality fitness class (nearly 1,000 original programs per month from 81 showrooms) from your own home!
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The concept has caught on fast (my wife, the beautiful Mrs. Cintolo has been using the bike for three years; 650-plus rides so far!).
The key here is the business model — not only does Peloton make money from the sale of the bike and treadmill (which can run two grand or so, though there’s a 30-day free test period, installation included), but it also makes recurring revenue (~$40 per month) from a monthly subscription to access the live and recorded workout sessions.
At the end of September, paying members totaled 562,777, up 103% from a year ago (1.6 total member accounts—more than one person can use each bike), few people are leaving once they sign up (94% 12-month retention rate) as members are working out more (11.7 times per month, up from 8.9 a year ago), all of which has produced triple-digit revenue growth.
Earnings are deep in the red as the firm expands (vast majority of users are in the U.S., but it’s selling in the U.K. and Canada as well), but the potential is there, especially if Peloton moves down the price chain and attracts more mass market consumers. It’s a high-potential story.
PTON came public in September when IPOs were out of favor, and the stock opened below its pricing (at 29) and sold off after.
But it found consistent support in the $21-$22 area, reacted well to earnings, and has since ripped to new price highs. PTON will be very volatile, of course, but we think it can have a good run if the market cooperates. If you want in, you can nibble here or on dips and add on the way up.
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