Now is the time to get on Peloton
Although Peloton's stock debuted in late September 2019, it didn't soar until the pandemic hit. Before the pandemic, the company was growing well, but it was spending a lot of money to grow and investors were skeptical if there was enough market for its products.
Then the pandemic hit, fitness enthusiasts turned to Peloton to provide them with workout options while gyms were closed, sales skyrocketed, and Peloton's stock become one of the biggest pandemic success stories. Since January, the stock has lost close to 40% of its peak value. This is primarily because of concerns that the company could return to its net-loss financials as the pandemic wanes. After all, until the pandemic, Peloton was not very profitable.
As vaccines started getting rolled out many investors started to wonder if Peloton can sustain the growth it saw in 2020. I think it can. As mentioned in a previous article, I think Peloton will outlive the pandemic and continue to post strong numbers. Its moat is very deep. It has established a cult-like member base according to the customer satisfaction and subscription retention rate metrics. Its management's execution has been spot on including choosing to vertically integrate the business and have complete control of the end-to-end user experience, and growing its exclusive catalog with culturally relevant personalities. It has very high gross margins on all its products and most importantly, it has a lot of recurring revenues. Finally, remote work trends appear to be popular and aren't likely to reverse all the way to how they were before the pandemic.
Bottom line, considering that many of the hyper-growth stocks are currently trading at sky-high valuations, the stock's pullback makes for a great entry point, especially when recognizing the company's numerous qualities.
Then the pandemic hit, fitness enthusiasts turned to Peloton to provide them with workout options while gyms were closed, sales skyrocketed, and Peloton's stock become one of the biggest pandemic success stories. Since January, the stock has lost close to 40% of its peak value. This is primarily because of concerns that the company could return to its net-loss financials as the pandemic wanes. After all, until the pandemic, Peloton was not very profitable.
As vaccines started getting rolled out many investors started to wonder if Peloton can sustain the growth it saw in 2020. I think it can. As mentioned in a previous article, I think Peloton will outlive the pandemic and continue to post strong numbers. Its moat is very deep. It has established a cult-like member base according to the customer satisfaction and subscription retention rate metrics. Its management's execution has been spot on including choosing to vertically integrate the business and have complete control of the end-to-end user experience, and growing its exclusive catalog with culturally relevant personalities. It has very high gross margins on all its products and most importantly, it has a lot of recurring revenues. Finally, remote work trends appear to be popular and aren't likely to reverse all the way to how they were before the pandemic.
Bottom line, considering that many of the hyper-growth stocks are currently trading at sky-high valuations, the stock's pullback makes for a great entry point, especially when recognizing the company's numerous qualities.
Disclaimer: This post is merely my own assessment and is not an investment recommendation. For professional advice, seek input from a licensed investment advisor.
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