Author Topic: PTON - Peloton  (Read 63823 times)

Castanza

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Re: PTON - Peloton
« Reply #30 on: May 07, 2020, 07:17:02 AM »
What people don’t understand when they criticize this company’s products as “a bike with a screen on it” is that exercise—particularly cardio—has a big motivation hump for the individual. It’s absolutely essential that the person exercising makes a regular habit of it, but very hard to do. Peloton addresses that beautifully as the anecdotes on here indicate. And no, Nautilus or one of the copycats will not be as effective at achieving this.

There is a moat here.

If PTON is going to have a moat it's not going to be found in the equipment. It's going to be in the software/platform and quality of instructors. There are a lot of people out there buying either the Sunny Health & Fitness bike ($300) or the  Keiser M3i to avoid monthly bike fees. Couple this with the Pton app and you have a peloton lite version. You miss out on the functionality of riding stats, but to some that's not as important as having good trainers.

Isn't this a win/win situation?  The app's marginal cost is zero, and if consumers like certain instructors and like riding with their friends, then the cost of $10 bucks/month is prob not going to dissaude them to switch to a cheaper alternative.

Precisely. With just the app it becomes more akin to NFLX. The customers who own the bike will have a stickier relationship though.

Near term issues seem to be related to their logistics. Most areas don't get the "white glove" service that is promised(big deal? probably not). However, I've seen reports of customers taking delivery of un-assembled bikes simply to try and beat the 1-2 month shipping backlog. Draw from that what you may.

Simply out of curiosity I'd like to see what they are paying these instructors. If I had to guess I bet they are paying out the ass and also have some solid stock option plan as well.

I don't have a position or nor do I own a bike. But I think it's a false equivalence to compare this to the bowflex type trend of previous decades. PTON is about software integration/platform building as well as social network stickiness.
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KJP

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Re: PTON - Peloton
« Reply #31 on: May 07, 2020, 07:18:02 AM »
And no, Nautilus or one of the copycats will not be as effective at achieving this.

There is a moat here.


If the model proves profitable, what is there about it that can't be copied by a competitor?  Or do you believe there will be a significant first-mover advantage that would be very difficult to overcome?

Dalal.Holdings

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Re: PTON - Peloton
« Reply #32 on: May 07, 2020, 07:25:26 AM »
And no, Nautilus or one of the copycats will not be as effective at achieving this.

There is a moat here.


If the model proves profitable, what is there about it that can't be copied by a competitor?  Or do you believe there will be a significant first-mover advantage that would be very difficult to overcome?

The latter. Also their leaderboard tech which they successfully forced Flywheel into legal settlement. I think the chances are good they take out Echelon in court (or outside of it).

thepupil

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Re: PTON - Peloton
« Reply #33 on: May 07, 2020, 07:29:30 AM »
In exchanging e-mails with some friends about this I sent the below vision I had recently of a Valuesaur museum to be located in the vacant offices of hedge fund central in NYC.

And over here we find the most intact fossil of the Valuesaurus Rex, who went extinct during the Great Pandemic in the late stages of the Softwareeatstheworld Era. This fossil is particularly significant as extraordinary rare physical certificates of real estate and insurance companies were found preserved in amber in the same cave.

Let’s move onto the Buffettosaurus.

when this IPO’d I read the S-1 and talked to a lot of my friends with the bikes. My gut was the TAM was lower than projected because of cost but the pushback I received on the value proposition relative to alternatives led me to conclude this had more potential than my gut reaction. Of course any kind of quantitative attempt at valuing the earnings as a sum of the subscription revenue at a very generous multiple  and the 30% margin durable good that doesn’t need to be replaced for a long time at a low multiple led me to conclude it was pricing in pretty wide adoption, but I came away with the view that wide adoption was definitely a node in the probability tree and a higher probability than most would assume.

my wife wants a Soulcycle bike because "they don't ride to the beat" at Peloton...but Soulcycle can't seem to get their act together/manufacture and distribute. given our household Soulcycle expenditures the IRR on a Peloton purchase would be high.
« Last Edit: May 07, 2020, 07:33:03 AM by thepupil »

Castanza

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Re: PTON - Peloton
« Reply #34 on: May 07, 2020, 07:30:36 AM »
And no, Nautilus or one of the copycats will not be as effective at achieving this.

There is a moat here.


If the model proves profitable, what is there about it that can't be copied by a competitor?  Or do you believe there will be a significant first-mover advantage that would be very difficult to overcome?

Go up to any person on the street and ask them to name an exercise bike company. I guarantee the majority of people will say "Peloton". At this point PTON is better at marketing and branding themselves as a premium lifestyle choice. Similar to what Apple has done.
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Dalal.Holdings

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Re: PTON - Peloton
« Reply #35 on: May 07, 2020, 07:36:37 AM »
In exchanging e-mails with some friends about this I sent the below vision I had recently of a Valuesaur museum to be located in the vacant offices of hedge fund central in NYC.

And over here we find the most intact fossil of the Valuesaurus Rex, who went extinct during the Great Pandemic in the late stages of the Softwareeatstheworld Era. This fossil is particularly significant as extraordinary rare physical certificates of real estate and insurance companies were found preserved in amber in the same cave.

Let’s move onto the Buffettosaurus.

when this IPO’d I read the S-1 and talked to a lot of my friends with the bikes. My gut was the TAM was lower than projected because of cost but the pushback I received on the value proposition relative to alternatives led me to conclude this had more potential than my gut reaction. Of course any kind of quantitative attempt at valuing the earnings as a sum of the subscription revenue at a very generous multiple  and the 30% margin durable good that doesn’t need to be replaced for a long time at a low multiple led me to conclude it was pricing in pretty wide adoption, but I came away with the view that wide adoption was definitely a node in the probability tree and a higher probability than most would assume.

my wife wants a Soulcycle bike because "they don't ride to the beat" at Peloton...but Soulcycle can't seem to get their act together/manufacture and distribute. given our household Soulcycle expenditures the IRR on a Peloton purchase would be high.

The problem with “value investing” is that the Ben Graham style worked well mainly in the immediate decades after the Depression. And it probably works well for short periods (like when the entire market takes a big hit in a crisis). After that, you needed to wade into the more murky Munger waters where harder to pin things like behavioral aspects of consumers become much more important.

KJP

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Re: PTON - Peloton
« Reply #36 on: May 07, 2020, 07:42:12 AM »
And no, Nautilus or one of the copycats will not be as effective at achieving this.

There is a moat here.


If the model proves profitable, what is there about it that can't be copied by a competitor?  Or do you believe there will be a significant first-mover advantage that would be very difficult to overcome?

Go up to any person on the street and ask them to name an exercise bike company. I guarantee the majority of people will say "Peloton". At this point PTON is better at marketing and branding themselves as a premium lifestyle choice. Similar to what Apple has done.

That may well be true today, just as it was once true of Yahoo and MySpace.  My question was about tomorrow on the assumption that this business model proves profitable. 

Broeb22

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Re: PTON - Peloton
« Reply #37 on: May 07, 2020, 07:43:29 AM »
This reminds me of Herbalife. The shorts are all cheap introverts and don't understand that most people need human reinforcement, eg a coach or a class to lose weight.

Look, Peloton is not a new concept. It's simply not. There have been workout videos and home workout equipment since at least the dawn of Television.

Someone please show me the long-term use statistics on these home exercise pieces of equipment/videos.

And I'll grant you that most people need human reinforcement, such as a coach or a class. How many exercise studios are there out there? How many of them earn an economically significant/attractive return to their owners/operators? Would you want to compete against an irrational competitor? That's pretty much what Peloton does because their competition is constantly evolving with new fads (Barre, OrangeTheory, Spin, Crossfit, Yoga, Pilates, Insanity, Resistance Band Training, Zumba, Jazzercise, the Shake Weight, and the list could go on and on). That's a very competitive environment where market share changes quickly. If there is one thing I've learned, a business is much less likely to providing enduring investment returns if market share in that industry changes at a rapid pace (meaning relative market shares can move dramatically over the course of a decade). I think exercise equipment probably witnesses dramatic changes in customer behavior on a more frequent pace than that.




 https://www.youtube.com/watch?v=kK_zBEJRMmE

thepupil

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Re: PTON - Peloton
« Reply #38 on: May 07, 2020, 07:49:48 AM »
In exchanging e-mails with some friends about this I sent the below vision I had recently of a Valuesaur museum to be located in the vacant offices of hedge fund central in NYC.

And over here we find the most intact fossil of the Valuesaurus Rex, who went extinct during the Great Pandemic in the late stages of the Softwareeatstheworld Era. This fossil is particularly significant as extraordinary rare physical certificates of real estate and insurance companies were found preserved in amber in the same cave.

Let’s move onto the Buffettosaurus.

when this IPO’d I read the S-1 and talked to a lot of my friends with the bikes. My gut was the TAM was lower than projected because of cost but the pushback I received on the value proposition relative to alternatives led me to conclude this had more potential than my gut reaction. Of course any kind of quantitative attempt at valuing the earnings as a sum of the subscription revenue at a very generous multiple  and the 30% margin durable good that doesn’t need to be replaced for a long time at a low multiple led me to conclude it was pricing in pretty wide adoption, but I came away with the view that wide adoption was definitely a node in the probability tree and a higher probability than most would assume.

my wife wants a Soulcycle bike because "they don't ride to the beat" at Peloton...but Soulcycle can't seem to get their act together/manufacture and distribute. given our household Soulcycle expenditures the IRR on a Peloton purchase would be high.

The problem with “value investing” is that the Ben Graham style worked well mainly in the immediate decades after the Depression. And it probably works well for short periods (like when the entire market takes a big hit in a crisis). After that, you needed to wade into the more murky Munger waters where harder to pin things like behavioral aspects of consumers become much more important.

I agree and only own a couple of net nets (including one recently purchased at 1/3 of cash!).

Despite my incessant real estate posts, real estate comprises 15%-20% of my parents diversified portfolio which owns un-Graham stuff like MSFT/GOOG/AAPL/FB/CRM/700HK via Prosus almost PINS but then she ran away from me, but is anchored with BRK/B as the largest position. I am personally more aggressively/heavily in real estate and have a less tech

I think pure Graham stuff is really hard to do for a lot of reasons and am not a pure Graham guy by any means; he would think my levered CRE investments are going to zero because of what happened to such things in the Depression.

But when you see things like SHOP at $85 billion or PTON, you nevertheless feel like a dinosaur. And let's not act like I'm being super forward thinking with my tech stocks either. I bought all those well after they became what they are.

Seeing where the puck is going at these sales multiples (SHOP on its sales, PTON on its subscriptions, or TSLA with its seeming fraudi-ness and stock levitation) is freaking hard. I mostly just look on with a mix of admiration, disgust, and confusion.
« Last Edit: May 07, 2020, 08:06:07 AM by thepupil »

Castanza

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Re: PTON - Peloton
« Reply #39 on: May 07, 2020, 07:52:05 AM »
And no, Nautilus or one of the copycats will not be as effective at achieving this.

There is a moat here.


If the model proves profitable, what is there about it that can't be copied by a competitor?  Or do you believe there will be a significant first-mover advantage that would be very difficult to overcome?

Go up to any person on the street and ask them to name an exercise bike company. I guarantee the majority of people will say "Peloton". At this point PTON is better at marketing and branding themselves as a premium lifestyle choice. Similar to what Apple has done.

That may well be true today, just as it was once true of Yahoo and MySpace.  My question was about tomorrow on the assumption that this business model proves profitable.

It's a valid point, and I am by no means saying there won't be competition. Just pointing out in the near term PTON definitely has an advantage. The big questions down the line I have no answer for. Also why I have no position. I just know the people who have them love them and don't shut the hell up about them. I've never heard someone brag about their Nordic Track or Echelon.
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