Corner of Berkshire & Fairfax Message Board

General Category => Investment Ideas => Topic started by: wescobrk on December 12, 2019, 04:13:08 PM

Title: PTON - Peloton
Post by: wescobrk on December 12, 2019, 04:13:08 PM
This is purely speculation but I'm inclined to put on a small position amidst the controversy over the "sexist"commercial. 70% short. A squeeze can easily bump this from $30 to $40.
Title: Re: Peloton
Post by: Gregmal on December 12, 2019, 04:28:26 PM
I definitely have a short bias towards this, however agree. Specifically with the Citron short endorsement the other day. What most dont realize is that the more exposed these things become to the premature short attacks, the more resilient they become to them, and ultimately, the longer they stay elevated and/or become prone to rip hard the other way.
Title: Re: Peloton
Post by: Sullivcd on December 12, 2019, 06:01:49 PM
Watching basketball right now and have seen multiple commercials for exercise equipment with a built in screen airing a personal trainer leading a session. No moat
Title: Re: Peloton
Post by: Cardboard on December 12, 2019, 06:32:18 PM
I like the wife in the ad: hot but, kind is my kind  ;)
Title: Re: Peloton
Post by: wescobrk on December 12, 2019, 07:03:07 PM
Watching basketball right now and have seen multiple commercials for exercise equipment with a built in screen airing a personal trainer leading a session. No moat

I don't understand why anyone would pay $2k for a bike. I don't understand how it has a moat, yet, according to their investor presentation, they have 94% retention and are grew 110% year over year. Within 3-5 years I see where Citron is coming from but he is crazy if he thinks this is going to $5 in the coming weeks just like he and Whitney Tilson thought Tesla was going below $100.
Title: Re: Peloton
Post by: Lakesider on December 12, 2019, 07:09:10 PM
Its a status symbol, its why people buy designer sunglasses rather than high street ones.
Title: Re: Peloton
Post by: Gregmal on December 12, 2019, 07:17:41 PM
100% correct observation wescobrk. While all the value investor fanboys often quote things about "the market is a voting machine in the short term and a weighing machine in the long term", very few actually get it. At least not in any sort of useful way and that is why they underperform greatly.

Unsophisticated investors(generally speaking) are unknowingly the voting machine. Sophisticated investors, largely think and convince themselves they are the weighing machine because they bust out the calculators and spreadsheets and run DCF analysis and all that mumbo jumbo. The unsophisticated tread water until the tide goes out, and the weighing machine crowd sits around underperforming, clueless as to why. The real opportunities are when the two converge; aka a catalyst. Others call it timing.

If you are looking to short Peloton, wait til theres a catalyst. Until then you'll just ride the wave of the voting machine; which if I had to guess, is probably up, short term.
Title: Re: PTON - Peloton
Post by: Artha158 on December 13, 2019, 07:15:57 AM
+1
Title: Re: PTON - Peloton
Post by: TorontoRaptorsFan on December 13, 2019, 08:14:45 AM
I bought a Peloton and love it. I use it about 5-6 days a week.
Wide variety of instructors and levels for everyone. I find the workouts challenging. The customer base is very loyal to the product.
Especially during the cold winter months it's far easier to workout using my Peloton then go to the gym early in the morning.
Title: Re: Peloton
Post by: chesko182 on December 13, 2019, 08:14:55 AM
Watching basketball right now and have seen multiple commercials for exercise equipment with a built in screen airing a personal trainer leading a session. No moat

I don't understand why anyone would pay $2k for a bike. I don't understand how it has a moat, yet, according to their investor presentation, they have 94% retention and are grew 110% year over year. Within 3-5 years I see where Citron is coming from but he is crazy if he thinks this is going to $5 in the coming weeks just like he and Whitney Tilson thought Tesla was going below $100.

from what I understand, the 94% retention is very inflated because they were locking in customers for 12-18 months with special offers/free trials so when those subs come off that window there should be a pretty significant increase in churn.

Source and disclaimer: I read this on Twitter from multiple people who follow it more closely than I do.
Title: Re: PTON - Peloton
Post by: brisbane on December 13, 2019, 09:00:33 AM
I bought a Peloton and love it. I use it about 5-6 days a week.
Wide variety of instructors and levels for everyone. I find the workouts challenging. The customer base is very loyal to the product.
Especially during the cold winter months it's far easier to workout using my Peloton then go to the gym early in the morning.

Agree, it's a quality product. The hardware alone is priced competitively with similar-quality bikes, and the all-in monthly cost (assuming you are taking advantage of the 0% financing offer) make a lot of sense vs. gym memberships if 2+ people are using it.

A lot of people on this board (see the Restoration Hardware thread) seem to think that just because a product doesn't have value for them it doesn't have any value. A brand is a very powerful thing!

I think the bigger issue is how faddish it is, macroeconomic/demographic tailwinds to support growth, how many people will continue to use the bike for 5+ years, etc... But I don't see it being displaced easily by a competitor. There are scale benefits to acquiring music rights and talent, building a huge content library of on-demand rides, and for many people (not myself) the community is important.
Title: Re: PTON - Peloton
Post by: chrispy on December 13, 2019, 10:21:41 AM
My wife and I bought one, canceled our gym membership, and are enjoying it for all of the reasons described above.

Peloton has become synonymous with home workouts with instructors. How much of a fad is the $$$ question
Title: Re: PTON - Peloton
Post by: CorpRaider on December 13, 2019, 10:34:31 AM
Boomers, it's a lifestyle brand/media platform/network/saas business, just like go pro.
Title: Re: PTON - Peloton
Post by: brisbane on December 13, 2019, 10:44:07 AM
Boomers, it's a lifestyle brand/media platform/network/saas business, just like go pro.

Go Pro was a SaaS business?
Title: Re: PTON - Peloton
Post by: Cigarbutt on December 13, 2019, 11:09:42 AM
I looked into Peloton's numbers and report that it won't stay on the watchlist.

Some people do benefit from the external reinforcement of a 'community' but wonder how this kind of specific moat can be maintained.
Training has been, and will be, a matter of hype, to a large and recurrent extent.

Two weeks ago, I set up my TACX trainer (bought years and years ago at 249$ CDN) and, over the years, have tried different setups + or - online connections or screens. This year's setup is the ideal one, at least for me. Although less than 5% of time spent on the saddle is achieved inside, the orientation of the stationary bike is best lined up with a window, through which I can visualize what it's going to be like for real in a few weeks, out there in the wild.

My humble experience when paths cross with 'community' training enthusiasts is that they like to talk about the value of their bikes and are usually OK with short and high intensity segments although they typically are no challenge when any kind of endurance is concerned. It seems to me that training, pretty much like investing, is best done alone. Riding with the peloton is fun but there's nothing like being able to detach and forget about the crowd.
Title: Re: Peloton
Post by: nspo on February 16, 2020, 08:26:54 PM
100% correct observation wescobrk. While all the value investor fanboys often quote things about "the market is a voting machine in the short term and a weighing machine in the long term", very few actually get it. At least not in any sort of useful way and that is why they underperform greatly.

Unsophisticated investors(generally speaking) are unknowingly the voting machine. Sophisticated investors, largely think and convince themselves they are the weighing machine because they bust out the calculators and spreadsheets and run DCF analysis and all that mumbo jumbo. The unsophisticated tread water until the tide goes out, and the weighing machine crowd sits around underperforming, clueless as to why. The real opportunities are when the two converge; aka a catalyst. Others call it timing.

If you are looking to short Peloton, wait til theres a catalyst. Until then you'll just ride the wave of the voting machine; which if I had to guess, is probably up, short term.
+1
Title: Re: PTON - Peloton
Post by: misterkrusty on February 17, 2020, 07:19:45 AM
Peloton has a lockup expiration coming up on March 24th, which will increase the float from ~40M to 280M shares.  That might be a catalyst.
Title: Re: PTON - Peloton
Post by: chrispy on March 13, 2020, 05:00:11 AM
No thoughts on the stock but I am very happy to have this bike at home right now
Title: Re: PTON - Peloton
Post by: Read the Footnotes on March 13, 2020, 05:07:20 AM
No thoughts on the stock but I am very happy to have this bike at home right now
There's still time. Andrew Left has a plan for how you can still get one delivered to your door from Amazon for $12. This should still be possible in spite of the pandemic.

https://citronresearch.com/wp-content/uploads/2019/12/Citron-Research-Presents-Peloton-Investors-Pedaling-Themselves-into-Frenzy.pdf
Title: Re: PTON - Peloton
Post by: Dalal.Holdings on March 13, 2020, 07:18:46 AM
Great product with a moat that shorts love to hate but customers swear by. Reminds me of a certain EV company.

One problem I have w co is the management incentive plan that effectively allows for 5% dilution a year for 10 years. They also pulled lockup back to February. Suspicious actions, not very shareholder oriented.
Title: Re: PTON - Peloton
Post by: Dalal.Holdings on May 06, 2020, 06:47:47 PM
https://www.cnbc.com/2020/05/06/peloton-pton-reports-fiscal-q3-2020-earnings.html

This co will only come out of this crisis stronger...
Title: Re: PTON - Peloton
Post by: valueinvestor on May 06, 2020, 08:28:33 PM
I was tempted but ultimately did not pull the trigger before because I don't understand it. I think I'm going to order a bike for my mother, and see what it's all about - however, has anyone tried the product?

Title: Re: PTON - Peloton
Post by: EricSchleien on May 06, 2020, 09:47:55 PM
I was tempted but ultimately did not pull the trigger before because I don't understand it. I think I'm going to order a bike for my mother, and see what it's all about - however, has anyone tried the product?

yup, it came with my apartment. we have a peloton studio. the bikes are great. its the only cardio I've ever been able to stick to in my entire life, I hate cardio.
Title: Re: PTON - Peloton
Post by: ratiman on May 07, 2020, 01:09:02 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.
Title: Re: PTON - Peloton
Post by: TorontoRaptorsFan on May 07, 2020, 05:01:46 AM
I never bought the stock but own a Peloton bike.
I use it about 5 times a week. I'm definitely a fan of the product. If you find an instructor(s) you like then you'll be more motivated to use the bike.
I usually turn off the leaderboard settings which for a lot of people they like for motivation.
Title: Re: PTON - Peloton
Post by: Dalal.Holdings on May 07, 2020, 06:09:33 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 achieve. It’s why most bikes end up as drying racks...

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.

At some point I would have said that this company would have been the perfect target for AAPL with all its cash on hand and a significant overlap in customer base, but I do not think Cook is visionary enough to see it. Would certainly do better than the Beats acquisition.
Title: Re: PTON - Peloton
Post by: Castanza on May 07, 2020, 06:17:47 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.

Title: Re: PTON - Peloton
Post by: Dalal.Holdings on May 07, 2020, 06:36:04 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.

Yep—that’s why they invest heavily in their production studios in places like NYC. It’s tv level production. You’re not going to win with a guy at home in his sweatpants running a class (though maybe that’s what they are doing now w covid lockdowns).
Title: Re: PTON - Peloton
Post by: Kaegi2011 on May 07, 2020, 06:39:10 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. 
Title: Re: PTON - Peloton
Post by: Dalal.Holdings on May 07, 2020, 06:41:01 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.
Title: Re: PTON - Peloton
Post by: Castanza 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.
Title: Re: PTON - Peloton
Post by: KJP 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?
Title: Re: PTON - Peloton
Post by: Dalal.Holdings 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).
Title: Re: PTON - Peloton
Post by: thepupil 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.
Title: Re: PTON - Peloton
Post by: Castanza 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.
Title: Re: PTON - Peloton
Post by: Dalal.Holdings 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.
Title: Re: PTON - Peloton
Post by: KJP 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. 
Title: Re: PTON - Peloton
Post by: Broeb22 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 (https://www.youtube.com/watch?v=kK_zBEJRMmE)
Title: Re: PTON - Peloton
Post by: thepupil 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.
Title: Re: PTON - Peloton
Post by: Castanza 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.
Title: Re: PTON - Peloton
Post by: merkhet on May 07, 2020, 07:56:25 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 achieve. It’s why most bikes end up as drying racks...

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.

At some point I would have said that this company would have been the perfect target for AAPL with all its cash on hand and a significant overlap in customer base, but I do not think Cook is visionary enough to see it. Would certainly do better than the Beats acquisition.

+1

I have also been musing over whether Nike should try to own this. I can see a world in which Peloton heavily branches into apparel over time.
Title: Re: PTON - Peloton
Post by: Castanza on May 07, 2020, 07:59:44 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 (https://www.youtube.com/watch?v=kK_zBEJRMmE)

The difference is Peloton is quickly becoming a cultural status item like the iPhone did. The branding/marketing difference is unreal. Those previous exercise equipment fads have a stigma of becoming nothing but clothes hangers that you hide in some backroom of your house. Peloton is something you put in a front room so every friend who comes over sees your big dick swinging Peloton "piece of art" and thinks to themselves, "damn, what am I doing wrong". Add in the best in class platform and you may have a recipe for success. As I said, no position currently. But I think there is more to consumer perception with PTON than people are giving credence.
Title: Re: PTON - Peloton
Post by: KJP on May 07, 2020, 08:04:48 AM

Peloton is something you put in a front room so every friend who comes over sees your big dick swinging Peloton "piece of art" and thinks to themselves, "damn, what am I doing wrong". Add in the best in class platform and you may have a recipe for success.

From this perspective, is the (to me at least) high cost of Peloton a feature, rather than a bug?
Title: Re: PTON - Peloton
Post by: Castanza on May 07, 2020, 08:13:40 AM

Peloton is something you put in a front room so every friend who comes over sees your big dick swinging Peloton "piece of art" and thinks to themselves, "damn, what am I doing wrong". Add in the best in class platform and you may have a recipe for success.

From this perspective, is the (to me at least) high cost of Peloton a feature, rather than a bug?

I would guess that it is a feature. You can find other exercise equipment (see sunny bike) which is very similar mechanically, yet costs about 1/3rd of the price.
Title: Re: PTON - Peloton
Post by: misterkrusty on May 07, 2020, 08:31:24 AM
"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."

Now this is the sort of genius-level insight that makes CoBF so great.  People need human reinforcement?  Arghhh!  Why didn't I realize that before?  Now I see that Peloton's $2,250 bike is the only way to get human reinforcement ... unless you own a different bike and subscribe to their  TV-production-quality classes for $12 a month. 

When I see that big-swinging-dick piece of art in my friend's living room I just pull an American Psycho and think "I am overcome with a wave of jealousy.  Tom's exercise bike is clearly more expensive than mine..."  If only my exercise options were confined to my home ... if only I could be that glorious hamster on a wheel ... if only my quads were the only muscle group that mattered...

I ain't one of those losers who think current sales are a function of everyone being stuck at home.  Don't they see it's so much more than that?  Thanks to y'all, I "get it"
Title: Re: PTON - Peloton
Post by: Kaegi2011 on May 07, 2020, 08:42:16 AM
"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."

Now this is the sort of genius-level insight that makes CoBF so great.  People need human reinforcement?  Arghhh!  Why didn't I realize that before?  Now I see that Peloton's $2,250 bike is the only way to get human reinforcement ... unless you own a different bike and subscribe to their  TV-production-quality classes for $12 a month. 

When I see that big-swinging-dick piece of art in my friend's living room I just pull an American Psycho and think "I am overcome with a wave of jealousy.  Tom's exercise bike is clearly more expensive than mine..."  If only my exercise options were confined to my home ... if only I could be that glorious hamster on a wheel ... if only my quads were the only muscle group that mattered...

I ain't one of those losers who think current sales are a function of everyone being stuck at home.  Don't they see it's so much more than that?  Thanks to y'all, I "get it"

I think you're being too dismissive.  NObody saw the pandemic, but it is what it is, and in this instance I see two factors that dramatically impact their business:

1) CAC goes way down, because people are coming to them organically, and even with advertising the CPMs are way lower than before.  Assuming LTV has not changed, each incremental customer is that much more valuable.

2) I would argue that LTV is probably increasing at the moment.  When people need an outlet to exercise, and they experiment and **stick** to a routine such at the bike/app that they otherwise might not have and see the results, they might be more inclined to subscribe longer. 

If you believe those two facts, plus runway to profitability, you might get comfortable with the stock price.  Now I wish I had the foresight to invest, but I do believe there are good reasons for the stock to have done what it's done. 
Title: Re: PTON - Peloton
Post by: Broeb22 on May 07, 2020, 08:51:37 AM

Peloton is something you put in a front room so every friend who comes over sees your big dick swinging Peloton "piece of art" and thinks to themselves, "damn, what am I doing wrong". Add in the best in class platform and you may have a recipe for success.

From this perspective, is the (to me at least) high cost of Peloton a feature, rather than a bug?

What you just described is a Giffen good, a luxury item. If that is what you're arguing, then how wide can the adoption really be? How many people are in the Fuck You Money Expensive Equipment Market? What % of the available market has already tried and failed with purchasing expensive exercise equipment? Will the churn for each new customer, who I would guess is less likely to be a passionate cycler, remain at its current level or increase over time?



I would guess that it is a feature. You can find other exercise equipment (see sunny bike) which is very similar mechanically, yet costs about 1/3rd of the price.
Title: Re: PTON - Peloton
Post by: thowed on May 07, 2020, 09:03:04 AM
I mostly just look on with a mix of admiration, disgust, and confusion.

I don't know if you've read Adam Smith's 'The Money Game' but he covered all this stuff in the mid-70s.  It's Gerry Tsai all over again.  We need some kids to understand it for us.
Title: Re: PTON - Peloton
Post by: misterkrusty on May 07, 2020, 09:11:23 AM
Ahh yes, the "Valuesaur Museum" ... that's a sore subject for me because I was told back in 1999 that I was to be dunked in formaldehyde and featured prominently in one of the main exhibits.  And then in 2002 they call me and say sorry not gonna happen.  Bastards!

Oh that sweet, sweet subscription revenue.  At $12/month less production costs it might wind up being some small amount of profit.  But, if you have the "vision" to capitalize that at a visionary multiple, you might wind up exceeding the current $12 billion market cap. 

Just curious, were any of you guys in FBIT or GPRO?  be honest
Title: Re: PTON - Peloton
Post by: KJP on May 07, 2020, 09:37:55 AM
Ahh yes, the "Valuesaur Museum" ... that's a sore subject for me because I was told back in 1999 that I was to be dunked in formaldehyde and featured prominently in one of the main exhibits.  And then in 2002 they call me and say sorry not gonna happen.  Bastards!

Oh that sweet, sweet subscription revenue.  At $12/month less production costs it might wind up being some small amount of profit.  But, if you have the "vision" to capitalize that at a visionary multiple, you might wind up exceeding the current $12 billion market cap. 

Just curious, were any of you guys in FBIT or GPRO?  be honest

I doubt they expect the $12/month subscription to be a standalone business.  There already are competing streaming workout services at similar prices, e.g., Beachbody on Demand, and, as you suggest, likely little moat in solely that type of business.  But if you already produce a bunch of content for people paying $40/month, then making some it available for $12/month would be largely high margin incremental revenue, so long as it doesn't cannibalize the $40/month product and so long as you keep your CAC under control.  It would be akin to a car dealer selling gap insurance -- you'd be unlikely to sell that standing, but you do it when you sell it at very little incremental cost to your main business.
Title: Re: PTON - Peloton
Post by: thepupil on May 07, 2020, 10:08:46 AM
I mostly just look on with a mix of admiration, disgust, and confusion.

I don't know if you've read Adam Smith's 'The Money Game' but he covered all this stuff in the mid-70s.  It's Gerry Tsai all over again.  We need some kids to understand it for us.

So in like 2014 I did happen upon "the Go-Go Years" which really struck a cord with me when I was hearing about the wonders of platform companies and roll-ups like Valeant. In an interview, someone asked me what I thought of Colfax and Valeant, and I just kind of sheepishly said..."it seems more like the book the Go-Go Years than the Outsiders, but I don't know". the dude looked at me like I had three heads.

Perhaps because of my overly bookish and non committal response I was not rewarded with another interview.

Of course, Constellation Software is up 3-8x since then (not sure of exact date) so there was something to that whole Compounder movement.
Title: Re: PTON - Peloton
Post by: misterkrusty on May 07, 2020, 12:09:11 PM
behold the rising # of visionaries who "get it" on PTON:  https://robintrack.net/symbol/PTON

by the way, Constellation Software is maybe, sorta, not exactly comparable.  Note the word "software" in the name. 
Title: Re: PTON - Peloton
Post by: roark33 on May 07, 2020, 12:18:13 PM
I will add a few comments.

I have a wahoo kicker and a Zwift subscription.  You can use your road bike for indoors training and zwift creates virtual races that are just awesome.  Competition, not sure, but I really love the product.

I remember when SHAK went public, it was worth like 4B during the first year.  It's worth 2B now and has 10x as many restaurants (maybe 20x, who knows).  Just because something works and does well, doesn't mean the valuation is right. 
Title: Re: PTON - Peloton
Post by: thepupil on May 07, 2020, 12:18:43 PM
behold the rising # of visionaries who "get it" on PTON:  https://robintrack.net/symbol/PTON

by the way, Constellation Software is maybe, sorta, not exactly comparable.  Note the word "software" in the name.

yes, I just meant the movement of valuing accretive acquisitions before they come to be. that was the innovation of the platform era and applied to a lot of the "Compounders/outsiders", and some of those were right in doing so [Transdigm, Constellation]. many were wrong [Valeant, Endo, Platform Specialty,Colfax, etc.].

a glorious extreme spin-off of this movement was the GP/LP Asset manager platform companies. AAMC trading at 100% of AUM because of all the capital it was going to raise comes to mind. May the Bill Erbey complex rest in peace. $30-->$1200-->$13 w/i in a decade, a cautionary tale for value oriented short-sellers everywhere

this is a SAAS company. Spinning as a Service, so it's cheap for a SAAS company  ;D
Title: Re: PTON - Peloton
Post by: Castanza on May 07, 2020, 12:42:27 PM
"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."

Now this is the sort of genius-level insight that makes CoBF so great.  People need human reinforcement?  Arghhh!  Why didn't I realize that before?  Now I see that Peloton's $2,250 bike is the only way to get human reinforcement ... unless you own a different bike and subscribe to their  TV-production-quality classes for $12 a month. 

When I see that big-swinging-dick piece of art in my friend's living room I just pull an American Psycho and think "I am overcome with a wave of jealousy.  Tom's exercise bike is clearly more expensive than mine..."  If only my exercise options were confined to my home ... if only I could be that glorious hamster on a wheel ... if only my quads were the only muscle group that mattered...

I ain't one of those losers who think current sales are a function of everyone being stuck at home.  Don't they see it's so much more than that?  Thanks to y'all, I "get it"

FWIW, look up your local spin class prices. Around me the going rate is $15 per class and this requires you to schedule a time, drive to the studio/gym, etc. 5 days a week at $15 dollars would be what 3.9k a year? I don't think it's that hard to justify the price of the bike and subscription service to people who "spin".
Title: Re: PTON - Peloton
Post by: thepupil on May 07, 2020, 12:45:29 PM
$15 is cheap. the breakeven is quick and the IRR is high on the bike if you are a fellow yuppie scum that goes to Soulcycle/Flywheel/etc regularly, assuming you value the at-home experience similarly (which many do not but many do)

SOULCYCLE
30 Classes
$825
Title: Re: PTON - Peloton
Post by: misterkrusty on May 07, 2020, 12:48:31 PM
yes, I have no doubt that Peloton is a lot cheaper than a gym for anyone dedicated to spinning.  but I don't think Peloton's target market is the folks who can afford the time/travel/day-care to attend spin class in person.  I've heard it's more like the mom who can't take her eye off the kids.
Title: Re: PTON - Peloton
Post by: chrispy on May 07, 2020, 12:51:10 PM
or anyone that fits the description provided by Castanza
Title: Re: PTON - Peloton
Post by: fareastwarriors on May 07, 2020, 06:31:56 PM
yes, I have no doubt that Peloton is a lot cheaper than a gym for anyone dedicated to spinning.  but I don't think Peloton's target market is the folks who can afford the time/travel/day-care to attend spin class in person.  I've heard it's more like the mom who can't take her eye off the kids.

Really? Most of the spin folks that I know goto their spin classes during lunch and still do their Peloton's at nights or weekends.. They are hooked.
Title: Re: PTON - Peloton
Post by: misterkrusty on May 08, 2020, 08:30:06 AM
Folks, it's time to talk about the elephant in the room ... yes, the $12 billion valuation.  Let's all gather 'round in a circle and take a deep breath...

Of course Peleton bikes are nice and the classes are great and lots of people love it.  Tell me why so many more people are going to spend all that money on the bike and stick with the subscription such that this company will grow into its valuation.

At the top of the page you'll see the words "value investors haven."  But this thread feels like it's 1999 and we're talking about CMGI on ragingbull.com   It's a paradigm shift!   
Title: Re: PTON - Peloton
Post by: BG2008 on May 08, 2020, 08:40:09 AM
Folks, it's time to talk about the elephant in the room ... yes, the $12 billion valuation.  Let's all gather 'round in a circle and take a deep breath...

Of course Peleton bikes are nice and the classes are great and lots of people love it.  Tell me why so many more people are going to spend all that money on the bike and stick with the subscription such that this company will grow into its valuation.

At the top of the page you'll see the words "value investors haven."  But this thread feels like it's 1999 and we're talking about CMGI on ragingbull.com   It's a paradigm shift!

Come on, we all know that valuations doesn't matter, sentiments and story telling and future promises matter more.  Who wants to own a bond like plastic packaging company trading at 6x FCF. Ewww, plastic.  :)
Title: Re: PTON - Peloton
Post by: Spekulatius on May 08, 2020, 08:55:11 AM
So, the subscription price for Peloton bike is just $12.99? That’s pretty cheap. I recall it being $40 a while ago - did they lower prices?
Title: Re: PTON - Peloton
Post by: KJP on May 08, 2020, 08:59:33 AM
Folks, it's time to talk about the elephant in the room ... yes, the $12 billion valuation.  Let's all gather 'round in a circle and take a deep breath...

Of course Peleton bikes are nice and the classes are great and lots of people love it.  Tell me why so many more people are going to spend all that money on the bike and stick with the subscription such that this company will grow into its valuation.

At the top of the page you'll see the words "value investors haven."  But this thread feels like it's 1999 and we're talking about CMGI on ragingbull.com   It's a paradigm shift!

Well, here's a two-minute effort to back into the current valuation.  Let's assume the company reaches "scale" in five years.  Current value compounded annually at 10% (12 x 1.1^5) = ~ $19 billion.  Let's assume at that point the company is trading at 22x earnings (which likely implies it's still growing).  That implies $860 million in net earnings (19 billion/22).  At a 20% tax rate (might be higher), that would be ~$1.1 billion in pre-tax earnings/EBIT. 

Let's also assume that $100 million of that EBIT comes from selling equipment and other ancillary items.  So, $1 billion in EBIT needs to come from subscribers.  Let's assume at scale the subscription business (including replacement CAC and growth CAC) runs at a 40% operating margin.  [I made this up.  It's a key input, but I'm not aware of a useful benchmark and too lazy to research it.]  That would imply $2.5 billion in subscription revenue (1 billion/.4).  At $40/month, subs are paying about $500/year.  That implies 5 million full-price subscribers.  [2.5 billion/500]

This is obviously wildly oversimplified and includes key variables that I just plucked from the air.  I don't have better grounding for my margin estimates because Peloton is in the too hard pile for me.  But the statement that Peloton is wildly overpriced is the equivalent of saying that something in the cocktail napkin model above is wildly off base.  So, what in that model is obviously not going to happen? 
Title: Re: PTON - Peloton
Post by: KJP on May 08, 2020, 09:00:40 AM
So, the subscription price for Peloton bike is just $12.99? That’s pretty cheap. I recall it being $40 a while ago - did they lower prices?

No.  You're looked at the cheapo subscription that includes no Peloton equipment, and thus none of the cool features that come with it.
Title: Re: PTON - Peloton
Post by: roark33 on May 08, 2020, 10:35:31 AM
Folks, it's time to talk about the elephant in the room ... yes, the $12 billion valuation.  Let's all gather 'round in a circle and take a deep breath...

Of course Peleton bikes are nice and the classes are great and lots of people love it.  Tell me why so many more people are going to spend all that money on the bike and stick with the subscription such that this company will grow into its valuation.

At the top of the page you'll see the words "value investors haven."  But this thread feels like it's 1999 and we're talking about CMGI on ragingbull.com   It's a paradigm shift!

This is a pretty interesting comment re: raging bull.  Oddly, the founder of that website, is shutting down his hedge fund raging capital.  His portfolio was hurt most by lots of shorts that will probably work out eventually, but have just crushed him the past few years.  Also, his longs, generally everything. 
Title: Re: PTON - Peloton
Post by: Kaegi2011 on May 08, 2020, 10:42:14 AM
Folks, it's time to talk about the elephant in the room ... yes, the $12 billion valuation.  Let's all gather 'round in a circle and take a deep breath...

Of course Peleton bikes are nice and the classes are great and lots of people love it.  Tell me why so many more people are going to spend all that money on the bike and stick with the subscription such that this company will grow into its valuation.

At the top of the page you'll see the words "value investors haven."  But this thread feels like it's 1999 and we're talking about CMGI on ragingbull.com   It's a paradigm shift!

All financial assets are connected.  There's at least a possibility that the company can compound from here.  Care to explain how negative interest rates work in Europe?  Not trying to derail the conversation, but it's not like 50 years ago when reasonably scaled/successful/high margin businesses are selling for mid single digit PEs anymore.  This is all relative. 
Title: Re: PTON - Peloton
Post by: Jurgis on May 08, 2020, 11:31:16 AM
Folks, it's time to talk about the elephant in the room ... yes, the $12 billion valuation.  Let's all gather 'round in a circle and take a deep breath...

Of course Peleton bikes are nice and the classes are great and lots of people love it.  Tell me why so many more people are going to spend all that money on the bike and stick with the subscription such that this company will grow into its valuation.

At the top of the page you'll see the words "value investors haven."  But this thread feels like it's 1999 and we're talking about CMGI on ragingbull.com   It's a paradigm shift!

Come on, we all know that valuations doesn't matter, sentiments and story telling and future promises matter more.  Who wants to own a bond like plastic packaging company trading at 6x FCF. Ewww, plastic.  :)

(https://i.pinimg.com/originals/2d/f5/63/2df5639266692da005c84be4a2e60669.jpg)
Title: Re: PTON - Peloton
Post by: misterkrusty on May 08, 2020, 12:10:22 PM
Kaegi2011 - that was a truly useless response.  I never made any claims about what P/E is appropriate.  I never said this couldn't trade at a high multiple.  Maybe it could.  But you haven't even bothered to come up with an earnings estimate upon which apply a multiple.  See KJP's response for how this should be done.

WTF do negative interest rates in Europe have to do with anything?  You are a moron.

Title: Re: PTON - Peloton
Post by: misterkrusty on May 08, 2020, 12:44:28 PM
KJP-  thank you for being my only worthy "adversary."  In response, I'd suggest you take a look at this writeup (not mine, but I think it's well done):
https://www.valueinvestorsclub.com/idea/PELOTON_INTERACTIVE_INC/1135587058#description

Note the following: TAM estimate of ~1.8m  Churn estimate of ~16% (meaning they're gonna have to sell a whole lot of bikes on an ongoing basis just to stay flat.)  Company not showing any operating leverage despite rapid growth, so I'm not sure we can count on 40% EBIT margins

PS - Apple is now getting into excercise livestreaming, so I think the Apple of spinning is going to be Apple
Title: Re: PTON - Peloton
Post by: bizaro86 on May 08, 2020, 01:21:50 PM
KJP-  thank you for being my only worthy "adversary."  In response, I'd suggest you take a look at this writeup (not mine, but I think it's well done):
https://www.valueinvestorsclub.com/idea/PELOTON_INTERACTIVE_INC/1135587058#description

Note the following: TAM estimate of ~1.8m  Churn estimate of ~16% (meaning they're gonna have to sell a whole lot of bikes on an ongoing basis just to stay flat.)  Company not showing any operating leverage despite rapid growth, so I'm not sure we can count on 40% EBIT margins

PS - Apple is now getting into excercise livestreaming, so I think the Apple of spinning is going to be Apple

Pfft. If Apple wants the market leader they'll have to pay up and buy them out. Or maybe a merger of equals. Could call it Appeloton (pronounced 'apple-oton). 12 months of free spin class with iPhone purchase.
Title: Re: PTON - Peloton
Post by: Dalal.Holdings on May 09, 2020, 03:04:38 AM
I’m sure it will be as successful as Apple taking on Netflix or Disney+. Or Spotify.

Maybe they can bring in hit from the 1990s Jennifer Anniston to run a spin class...

This Cook guy. Not a product person.
Title: Re: PTON - Peloton
Post by: mattee2264 on May 09, 2020, 03:56:36 AM
There is nothing special about the app on its own. Any company could put together a crack team of good looking and charismatic instructors and build up a following quite easily.

However they do have a pretty good tie in between the bike and the app. The bike is super high quality and they've obviously put a lot of work into designing it. In fact it is a better ride than that of their competitors who have been in the exercise bike market for decades. And being able to see easily on the screen your cadence and resistance and output allows the instructors to precision engineer your workouts and allow you to track your progress over time and also compete against other users all around the world.

The bikes are high quality but there is nothing stopping other companies bringing out equally high quality bikes. But then again Nike shoes are no longer superior to competing brands but still sell at a premium. So I think they can continue to be the prestige brand in the market. Of course there will be some people who will go for cheaper knock-offs. But it is an aspirational brand and people these days are prepared to pay a lot for fitness and there are a lot of advantages to being able to work out within the comfort of your own home.

I think the main weakness of the business model is that music is a huge part of the workout and you'd expect music companies to want to extract a lot of the economic rent. I notice they often use covers for a lot of the songs and perhaps that is a reason why.
Title: Re: PTON - Peloton
Post by: Spekulatius on May 09, 2020, 05:53:18 AM
I don’t know about investing, but personally after reading this thread, I am more interested in buying a bike than before.
Title: Re: PTON - Peloton
Post by: Kaegi2011 on May 09, 2020, 06:20:52 AM
Kaegi2011 - that was a truly useless response.  I never made any claims about what P/E is appropriate.  I never said this couldn't trade at a high multiple.  Maybe it could.  But you haven't even bothered to come up with an earnings estimate upon which apply a multiple.  See KJP's response for how this should be done.

WTF do negative interest rates in Europe have to do with anything?  You are a moron.

Nice to meet you too.  You originally said:

"At the top of the page you'll see the words "value investors haven."  But this thread feels like it's 1999 and we're talking about CMGI on ragingbull.com   It's a paradigm shift!"

To which I gave a bigger picture response.  Apparently not satisfactory to your need for a detailed model proving how it'll grow into their valuation.  Fine.  Ignore it.  Just like you ignored BG2008's response that also did not include a detailed calculation, and Roark33's. 

Continue to look for your net nets and ignore interest rates as they are apparently useless.  I wish you the best. 
Title: Re: PTON - Peloton
Post by: KJP on May 09, 2020, 06:32:12 AM
KJP-  thank you for being my only worthy "adversary."  In response, I'd suggest you take a look at this writeup (not mine, but I think it's well done):
https://www.valueinvestorsclub.com/idea/PELOTON_INTERACTIVE_INC/1135587058#description

Note the following: TAM estimate of ~1.8m  Churn estimate of ~16% (meaning they're gonna have to sell a whole lot of bikes on an ongoing basis just to stay flat.)  Company not showing any operating leverage despite rapid growth, so I'm not sure we can count on 40% EBIT margins

PS - Apple is now getting into excercise livestreaming, so I think the Apple of spinning is going to be Apple

I think that VIC writeup makes some good points, but it contains more straw-man than steel-man arguments for the company, driven in part by the analogy that's central to the author's thesis.  Is a maker of at-home exercise equipment -- or, in the author's words, "long-lasting hardware" -- ever going to be worth $12 billion?  Highly unlikely for the reasons the author states -- once competition arrives, they all become toasters.  So, analogizing to hardware companies like GoPro and FitBit is, to some extent, attacking a straw man.  The lengthy excursion into Tesla-land is similar -- it seems more aimed at expressing solidarity with a certain investing worldview rather than providing information relevant to Peloton. 

Instead, if Peloton could ever be worth its price, it has to be because the company is something besides a seller of plain old consumer hardware.  That "something else" could be the streaming service/exercise platform/whatever you want to call it aspect of the business.  But that aspect of the company gets short shrift in the author's analysis.  For example, although the author doesn't believe it will happen, he or she purports to provide financials for a world in which the company has 3.5 million subscribers to its streaming service.  We are told that even in such a world the company wouldn't be worth close to its then market cap of $8.5 billion.  But why is that?  3.5 million people paying $500/year is $1.75 billion in subscription revenue.  What is the operating margin on that revenue going to be?  The author never tells us, nor provides any real analysis of the issue.  Instead, we're left only with a "blended" EBIT margin that's not supported by any analysis.  As my half-baked model suggested, I think the economics of the subscription business at "scale" (whatever that is) is one of the key variables here, but it's glossed over in this writeup because too much focus is placed on the hardware aspect, which could never support the value of the business.

That being said, the author does include two good points related to ultimate EBIT margins of the subscription business, though they aren't really highlighted:  1.  the margins may be lower than you'd initially expect because the company will have to pay performance royalties for the music it uses.  But we're told nothing about how much this cost actually is or how performance royalties scale (or don't) with the number of subscribers; and 2. in an essentially throw away line, the author says "once I started researching Peloton online, NordicTrack started feeding me multiple video ads every day."  Therein lies a critical problem for anyone building a consumer business via the internet -- once you prove you actually have something people want, competition drives your advertising costs up.  In the old days, TV, radio and newspapers ads were driven by marketwide demand, so a few additional advertisers in your niche likely had essentially no impact on your advertising costs.  But in a world built on keywords and targeting, a few new competitors targeting the same people as you really can drive up your advertising costs.  The higher churn is, the more this is a problem, so the author's viewpoints on churn are useful, but again based more on belief than facts at this point.

So, if analysis of the operating margin of the subscription business isn't really doing the work in the author's analysis, what does?  It appears to be (1) the author's view of TAM, and (2) the basic principle of capitalism and competition driving reversion to the mean.  With respect to TAM, the author admits having no way to really estimate it, but his or her bias shows in the rather flimsy analysis of potential international subscribers.  The latter point about the effects of competition is, of course, usually true.  It's why the Bayesian stays away from stuff like this.  So, at the end of the day, the author took 9 pages to say "In my opinion, the number of people in the world who will pay $40/month to have cool spin classes at home is likely in the low millions, and competition will divide those people among enough companies, and drive down their economics, such that it is impossible for Peloton to be worth $8.5 billion."  My gut agrees with that, but I don't think the author has done much to show that the existing facts prove the truth of those beliefs.

Title: Re: PTON - Peloton
Post by: KJP on May 09, 2020, 06:41:00 AM

This is a pretty interesting comment re: raging bull.  Oddly, the founder of that website, is shutting down his hedge fund raging capital.  His portfolio was hurt most by lots of shorts that will probably work out eventually, but have just crushed him the past few years.  Also, his longs, generally everything.

You mean longs like this:  https://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/rtk-rentech-inc/msg292525/#msg292525

Bad memories . . . .
Title: Re: PTON - Peloton
Post by: misterkrusty on May 11, 2020, 10:33:20 AM
KJP-  
I think the comparison to FBIT and GPRO was related to the catalyst - author sees this playing out like those two names in that once revenue growth started to stall for these "unicorns", the share prices got crushed.  Or maybe that was Citron's take.  Can't remember.

I agree this guy could do more work on the streaming margins.  But then again, so could you.  But it's hard.  We know that music royalties - to the extent that Peleton must pay them - decrease the operating leverage in this business.  But Peleton doesn't disclose the details around what it has to pay.  In any event, we're seeing a total lack of operating leverage in the business overall.  They're burning hefty cash.

How is pointing out intense competition is "a throwaway line"?  Competition matters.    

His comments on churn are as fact-based as they can be given the amount of disclosure from Peleton.  He HAS to make an assumption (ie belief) about how the growth rate is distorting this figure.  Even if you don't make an explicit assumption about the true churn, you're making an implicit one.  If 16% isn't the right number, tell us why.

"The author admits to having no way to estimate [TAM]?  What on Earth are you talking about?  The author literally walks you through his estimate step by step and backs plenty of the assumptions with facts - more facts than you gave us, my friend.
Title: Re: PTON - Peloton
Post by: misterkrusty on May 11, 2020, 10:37:34 AM
Kaegi-

I never said anything to imply - or cause anyone to believe - that I look for net nets or that I ignore interest rates.  Making unsupported and inane conclusions is why thou art a moron.
Title: Re: PTON - Peloton
Post by: Kaegi2011 on May 11, 2020, 12:22:52 PM
Kaegi-

I never said anything to imply - or cause anyone to believe - that I look for net nets or that I ignore interest rates.  Making unsupported and inane conclusions is why thou art a moron.

I know you didn't, which was the point.  Just as it wouldn't be fair to make assumptions about you, it wouldn't be fair for you to make assumptions about me, especially when it's clear that you have a lack of understanding of capital markets and their connections in the background.  Ever heard of cross currency swaps?  Do you really think interest rates in one part of the global markets have zero impact in other parts of the world and securities pricing?  But whatever, keep on calling people names - a way to really engage in a productive conversation.   ::)
Title: Re: PTON - Peloton
Post by: Dalal.Holdings on May 12, 2020, 07:16:50 PM
https://www.gwinvestors.com/investor-letters/

Quote
One company that appeared to have a fairly pronounced mismatch between valuation and NPS is Peloton (PTON), which we added during the coronavirus crisis sell-off. When I first mentioned the company to Chris, he thought I was referring to a possible short candidate. Yet with a NPS of 91, the second highest in the world, I respected the power of the emerging ecosystem of this company, which has similar characteristics to most luxury businesses. It sells its stationary bikes and treadmills for about 10x the cheapest competitive offerings, yet it still manages to save its 2.6 million subscribers significant sums of cash every month. Because the value of Peloton lies in the millions of hours of content, as well as live exercise classes, the monthly subscription fee of $39 is dwarfed by the monthly bills of boutique fitness studio goers, which number over 30 million in the United States, and who pay over $30 per class for their endorphin rush. Peloton gives these subscribers unlimited classes per month for just $39, or for digital subscribers, for just $13.

The company’s mission is to inspire its community to exercise more and engage with their exercise equipment at an accelerating rate. It has had great success in actually building bike and treadmill utilization over the years after purchase. This is in stark contrast to most gyms and exercise equipment which see a permanent decline in utilization after the initial honeymoon period. Despite the company, which is founder-led, being a significant beneficiary to the current pandemic, as all gyms and fitness studios remain closed, the stock was cut nearly in half in the prior three months when we had purchased our position. As the company articulated on its earnings call this week, it added record new customers to its ecosystem while also recording a record low in subscriber churn. The company’s myopic focus on increasing exercises per month and customer satisfaction allow it to build the largest, most convenient and best-valued exercise-oriented community in the world. There is now an unprecedented 7-8 week waiting list to join this rapidly growing community. We discussed the business at length in a note, which is now available on our website.

https://www.gwinvestors.com/wp-content/uploads/PTON-Research-Report-April-2020-v2.pdf
Title: Re: PTON - Peloton
Post by: Gregmal on May 12, 2020, 09:34:35 PM
So, just to clarify, Mr. Dalal Trump, who speaks loudly but says nothing, you are long Peloton?
Title: Re: PTON - Peloton
Post by: Dalal.Holdings on May 13, 2020, 03:41:26 AM
So, just to clarify, Mr. Dalal Trump, who speaks loudly but says nothing, you are long Peloton?

Hey President of Dalal Fan Club Greggie--glad to have you follow me around so loyally like a puppy! You are man's best friend!
Title: Re: PTON - Peloton
Post by: Broeb22 on May 13, 2020, 01:56:26 PM
https://www.gwinvestors.com/investor-letters/

Quote
One company that appeared to have a fairly pronounced mismatch between valuation and NPS is Peloton (PTON), which we added during the coronavirus crisis sell-off. When I first mentioned the company to Chris, he thought I was referring to a possible short candidate. Yet with a NPS of 91, the second highest in the world, I respected the power of the emerging ecosystem of this company, which has similar characteristics to most luxury businesses. It sells its stationary bikes and treadmills for about 10x the cheapest competitive offerings, yet it still manages to save its 2.6 million subscribers significant sums of cash every month. Because the value of Peloton lies in the millions of hours of content, as well as live exercise classes, the monthly subscription fee of $39 is dwarfed by the monthly bills of boutique fitness studio goers, which number over 30 million in the United States, and who pay over $30 per class for their endorphin rush. Peloton gives these subscribers unlimited classes per month for just $39, or for digital subscribers, for just $13.

The company’s mission is to inspire its community to exercise more and engage with their exercise equipment at an accelerating rate. It has had great success in actually building bike and treadmill utilization over the years after purchase. This is in stark contrast to most gyms and exercise equipment which see a permanent decline in utilization after the initial honeymoon period. Despite the company, which is founder-led, being a significant beneficiary to the current pandemic, as all gyms and fitness studios remain closed, the stock was cut nearly in half in the prior three months when we had purchased our position. As the company articulated on its earnings call this week, it added record new customers to its ecosystem while also recording a record low in subscriber churn. The company’s myopic focus on increasing exercises per month and customer satisfaction allow it to build the largest, most convenient and best-valued exercise-oriented community in the world. There is now an unprecedented 7-8 week waiting list to join this rapidly growing community. We discussed the business at length in a note, which is now available on our website.

https://www.gwinvestors.com/wp-content/uploads/PTON-Research-Report-April-2020-v2.pdf

I've seen Steven Wood present enough far-fetched bull theses that I no longer look to his research as particularly useful. He's a brilliant promoter with subpar investment results (see attachment). He compares his results to the MSCI ACWI which may be appropriate given what and where he's investing, but if you're a US-based investor, the MSCI ACWI has underperformed the S&P by 4.5% annually since 2010, so his results which lag the MSCI, are even worse if you compare against the S&P. He's lagged by 6.3% annually since 2010.
Title: Re: PTON - Peloton
Post by: wescobrk on May 13, 2020, 03:15:43 PM
I was curious if Left changed his thesis from $5 a share. I did a quick internet search and he gave an interview to TD Ameritrade (search you tube under stay at home trade) he now thinks it is worth $8 instead of $5.
He is obviously a successful guy but his track record I'm skeptical of.
I don't understand why Ackman, Left and others are so public with their shorts? They can only make 100% (assuming not using puts) yet they have infinite losses.
Title: Re: PTON - Peloton
Post by: Dalal.Holdings on May 13, 2020, 03:34:37 PM
I was curious if Left changed his thesis from $5 a share. I did a quick internet search and he gave an interview to TD Ameritrade (search you tube under stay at home trade) he now thinks it is worth $8 instead of $5.
He is obviously a successful guy but his track record I'm skeptical of.
I don't understand why Ackman, Left and others are so public with their shorts? They can only make 100% (assuming not using puts) yet they have infinite losses.

Lol, a 60% growth in value over a few months...
Title: Re: PTON - Peloton
Post by: winjitsu on May 13, 2020, 04:12:34 PM
Biden rides a Peloton. I'm long  8)

Quote
Now, nearly every morning, Biden spins through an early Peloton ride in the upstairs weight room, dresses (formally, no sweatpants), drinks his breakfast shake, and sits at the phone in his study awaiting the latest updates on the world’s misery.

https://nymag.com/intelligencer/2020/05/joe-biden-presidential-plans.html
Title: Re: PTON - Peloton
Post by: Pelagic on May 13, 2020, 04:38:09 PM
Mostly useless anecdote but for $12.99 a month you're hard pressed to find a better fitness app than Peleton's. Their platform is quite good and everyone I've talked to that has it has said they love it. Can't remember the last time I was on a bicycle but they have classes for everything, including some excellent muscle specific workouts that can be done at home.

Whether we can justify a $12B valuation with a couple million people paying $12.99 a month I doubt, but I have to imagine there's a much bigger market for high quality fitness classes and targeted workouts at $12.99 a month than there is for bikes + $40 a month.
Title: Re: PTON - Peloton
Post by: Dalal.Holdings on May 13, 2020, 05:23:51 PM
Mostly useless anecdote but for $12.99 a month you're hard pressed to find a better fitness app than Peleton's. Their platform is quite good and everyone I've talked to that has it has said they love it. Can't remember the last time I was on a bicycle but they have classes for everything, including some excellent muscle specific workouts that can be done at home.

Whether we can justify a $12B valuation with a couple million people paying $12.99 a month I doubt, but I have to imagine there's a much bigger market for high quality fitness classes and targeted workouts at $12.99 a month than there is for bikes + $40 a month.

Lol but did u read the VIC writeup doe?
Title: Re: PTON - Peloton
Post by: misterkrusty on May 14, 2020, 06:56:43 AM
Pelagic-  i don't disagree.  Frankly, I think Peloton will be around for a long time and even at a $1 billion valuation it would be an impressive success story. 

Not that it matters, but I prefer to do group classes in person because the public shame of slacking off is the biggest motivator I have to get fit.  I guess that's what the "leaderboard" does for some people.  Just curious - if someone in a Peloton class is slacking off, does the instructor ever call them out? 

MK
(currently trying to self-motivate to go run up some hills around here)
Title: Re: PTON - Peloton
Post by: Dalal.Holdings on June 26, 2020, 07:35:52 PM
 8)
Title: Re: PTON - Peloton
Post by: misterkrusty on June 27, 2020, 08:57:43 AM
https://robintrack.net/symbol/PTON

stuck-at-home millenials
+ no trading fees
+ no sports to bet on
= Dalal Holdings looks like a genius

Back in 1999 I was telling folks on the Motley Fool to cash in their dot com stocks...
Title: Re: PTON - Peloton
Post by: Dalal.Holdings on June 27, 2020, 09:15:44 AM
https://robintrack.net/symbol/BRK.B

https://robintrack.net/symbol/TLF

Confirmation bias--it's a helluva drug. Your data source might be confounded by the simple fact that there are more users on Robinhood in general, but wut do I know. Keep using that Robintrack to confirm your preconceived theories. Gotta love value investors who trick themselves with deeply flawed analysis...

BTW good luck with that TLF. I hear leathered goods are gonna make a comeback any day now...gonna be just as popular as Pelotons with the upper middle class types...any day now...

No wonder value investing is "dead"
Title: Re: PTON - Peloton
Post by: misterkrusty on June 27, 2020, 04:12:08 PM
"value investing is dead"  now where have I heard that before?

when the marginal bid in your stock is @TommyCheesebal3 or @fantasywhore and their thesis is #StayAtHomeStock it's time to cash in your chips.  In the short run, dumb luck works just fine, but long-term you need brains to win this game.

https://twitter.com/search?q=%24pton&src=typed_query
Title: Re: PTON - Peloton
Post by: Dalal.Holdings on June 27, 2020, 04:14:13 PM
"value investing is dead"  now where have I heard that before?

when the marginal bid in your stock is @TommyCheesebal3 or @fantasywhore and their thesis is #StayAtHomeStock it's time to cash in your chips.  In the short run, dumb luck works just fine, but long-term you need brains to win this game.

https://twitter.com/search?q=%24pton&src=typed_query

More astute analysis and insights! This right here surely sinks the bull thesis!

For the record, value investing ain’t dead, but many people who claim to be value investors do not know how to spot value! Where my boy Einhorn at?
Title: Re: PTON - Peloton
Post by: thepupil on August 09, 2020, 12:24:47 PM

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.

we've had a Soulcycle bike for about a month now (it's like a Taycan, more expensive and less popular than a Tesla but maybe extra smugness points).

We have ridden 22 times in the past month (5 for pupil and 17 for  the more fit mrs. pupil). If we did this at soulcycle, we would have spent $600. now pre-covid we only did 1 class every week or 2 so it's not a real comparison.

i haven't tried any of the other Variis workouts that come with the subscription.

Title: Re: PTON - Peloton
Post by: Dalal.Holdings on September 01, 2020, 07:07:44 AM
Well I guess this is riding the ZM gravy train today...
Title: Re: PTON - Peloton
Post by: Dalal.Holdings on September 02, 2020, 12:18:56 PM
(http://www.greenandgoldrugby.com/community/attachments/well-that-escalated-quickly-4306795-png.10372/)
Title: Re: PTON - Peloton
Post by: arcube on September 02, 2020, 12:43:09 PM
Well I guess this is riding the ZM gravy train today...

Going good into earnings.
Title: Re: PTON - Peloton
Post by: wescobrk on September 02, 2020, 02:08:19 PM
I wrote about this when it was at $25 and before the pandemic and I thought the person shorting it was an idiot even after the pandemic he only revised his short from $5 a share to $8 a share. I forgot the guys name. Andrew Left? Here it is more than 10x where he said it would be.
We all get calls wrong but I still don't understand how this idiot thought it would be below $10 and this was after we were shut down as a country and the government and fed were throwing helicopter money.
Title: Re: PTON - Peloton
Post by: Gregmal on September 02, 2020, 02:21:36 PM
I wrote about this when it was at $25 and before the pandemic and I thought the person shorting it was an idiot even after the pandemic he only revised his short from $5 a share to $8 a share. I forgot the guys name. Andrew Left? Here it is more than 10x where he said it would be.
We all get calls wrong but I still don't understand how this idiot thought it would be below $10 and this was after we were shut down as a country and the government and fed were throwing helicopter money.

Left(I know for a fact) trades his own noise. Many of those guys do. He targets weakly held Robinhood type stocks for a reason and is usually transacting around releases. He put a short call on one of the COVID vaccine hype stocks at 20 and it's at 150 now, but likely covered when his release knocked it to 15. Theres lot of folks like this out there.

EDIT: to clarify NVAX was the stock and its at $100 now, and traded as high as $190.

https://citronresearch.com/citron-updates-peloton/

Title: Re: PTON - Peloton
Post by: wescobrk on September 03, 2020, 03:38:26 AM
I was listening to a podcast last night on Shopify and he was calling it a pyramid and said he would donate to charity if it wasn't below $100 a share. The podcaster described him as adamant of how nefarious Shopify is as Ackman was so vocal in describing how evil Herbalife was.
We all know how Left did with his short on Spotify. Another company he was off by 10x.
Somehow the guy is successful so I'll give him credit for his marketing prowess.
Title: Re: PTON - Peloton
Post by: misterkrusty on September 03, 2020, 07:16:25 AM
but you're focusing on some of his worst performing calls in the most difficult time to be short story-stocks since the dot-com bubble.  Not exactly a fair way to appraise someone's track record. 

Also, there are very few shortsellers that don't have rules about covering positions when they go against them.  Even if you don't have rules, your broker gives you a margin call.  In other words, he probably covered long ago.  Personally, I only buy puts to avoid this risk.

Does the price action in SHOP prove that Left's criticisms were wrong?  It does not.  From the VIC:
This guy (https://absurdresearch.com/) went to the trouble of tracking Shopify domains to show that 85% of their customers are likely churning after their domain name registration expires in a year. This foots with what I've heard about the median revenue of a Shopify store being zero and 70%+ of Shopify stores being non-viable. He thought the stock was worth $60 and instead it is $760.



Title: Re: PTON - Peloton
Post by: wescobrk on September 03, 2020, 09:26:34 AM
You can make an argument that the price action doesn't make him wrong but he said the stock would be below $100 for Shopify and he also said Peloton would be single digits this year.
I would agree with you if he said (within 5 years) but he didn't,he make specific market calls and he was wrong by a factor of 10 for peloton and the same for Shopify.
Title: Re: PTON - Peloton
Post by: Gregmal on September 03, 2020, 09:46:03 AM
Urgency is always integral to a great sales pitch. If you are trading your own commotion, it is important to be as sensational as possible.
Title: Re: PTON - Peloton
Post by: misterkrusty on September 04, 2020, 08:23:27 AM
Like I said, it's really unlikely that he's still short.  Probably covered long ago, or structured a bearish bet thru options

You guys are judging him based on his worst calls and ignoring the best.  SHOP and so many other stocks are in a bubble right now.  Take it from someone who was saying the same sort of thing in 1999.
Title: Re: PTON - Peloton
Post by: Gregmal on September 04, 2020, 08:40:26 AM
You are perhaps mistaking my comments as a general disdain for Left/Citron. Quite the contrary. I follow him closely and admire some of his style. He is a unique investor.
Title: Re: PTON - Peloton
Post by: fareastwarriors on September 10, 2020, 01:53:09 PM

Peloton crushes estimates as sales surge 172%, expects strong demand to continue into 2021

https://www.cnbc.com/2020/09/10/peloton-pton-reports-fiscal-.html (https://www.cnbc.com/2020/09/10/peloton-pton-reports-fiscal-.html)

Peloton’s fiscal fourth-quarter sales surged 172%.

With such strong demand for its bike and treadmill, it said it doesn’t expect to return to “normalized order-to-delivery windows” in the U.S. before the end of the fiscal second quarter.

Peloton’s outlooks for first-quarter and fiscal 2021 sales also far exceed analysts’ expectations.
Title: Re: PTON - Peloton
Post by: Dalal.Holdings on September 10, 2020, 04:17:13 PM
 :)
Title: Re: PTON - Peloton
Post by: deadspace on September 10, 2020, 04:39:25 PM
but you're focusing on some of his worst performing calls in the most difficult time to be short story-stocks since the dot-com bubble.  Not exactly a fair way to appraise someone's track record. 

Also, there are very few shortsellers that don't have rules about covering positions when they go against them.  Even if you don't have rules, your broker gives you a margin call.  In other words, he probably covered long ago.  Personally, I only buy puts to avoid this risk.

Does the price action in SHOP prove that Left's criticisms were wrong?  It does not.  From the VIC:
This guy (https://absurdresearch.com/) went to the trouble of tracking Shopify domains to show that 85% of their customers are likely churning after their domain name registration expires in a year. This foots with what I've heard about the median revenue of a Shopify store being zero and 70%+ of Shopify stores being non-viable. He thought the stock was worth $60 and instead it is $760.


Churn with Shopify is irrelevant     It’s a feature not a bug.  It allows businesses to fail in the process of discovering those which will succeed

Follow GMV    That’s all you need to follow
Title: Re: PTON - Peloton
Post by: Broeb22 on September 10, 2020, 06:06:31 PM
I guess I’m the only one who still thinks this is a fad product...

The churn number is almost crazy low. Does it make sense for them to calculate net churn as opposed to gross churn? Net churn is kind of analogous to the DBNER Saas companies use so I guess it’s ok. It’s just not comparable to the gross churn numbers that other companies site (I’m thinking of SIRI but there’s likely others).

I guess I don’t have that much faith in humanity as a whole to really stick to exercising 4+ times per week, even if it’s a good deal compared to Soulcycle or whatever.

Also, if churn is as low as they say it is, why is Peloton starting to sell used bikes? I’m sure there is a good business reason for doing this, but there are very active and thriving used good sites (eBay, Craigslist, etc.) for people to offload these bikes. Why is Peloton going to buy these bikes back? At best, they will keep the price for their new bikes elevated by controlling supply of used bikes and at worst, they are essentially buying back obsolete inventory to keep sales of their new products going, which could turn into a balance sheet problem at some point (admittedly distant given the $1 billion in cash they have).

 https://finance.yahoo.com/news/peloton-will-start-selling-used-bikes-soon-215849632.html (https://finance.yahoo.com/news/peloton-will-start-selling-used-bikes-soon-215849632.html)


But what do I know? Trees do grow to the sky and there are tons of examples of exercise equipment/classes that have had staying power.

There’s a lot of terminal value built into the current price, and there’s a good argument that the market is valuing this company at a peak multiple of peak (at least a cyclical if not secular peak) revenues.
Title: Re: PTON - Peloton
Post by: Gregmal on September 10, 2020, 06:21:32 PM
I guess I’m the only one who still thinks this is a fad product...

The churn number is almost crazy low. Does it make sense for them to calculate net churn as opposed to gross churn? Net churn is kind of analogous to the DBNER Saas companies use so I guess it’s ok. It’s just not comparable to the gross churn numbers that other companies site (I’m thinking of SIRI but there’s likely others).

I guess I don’t have that much faith in humanity as a whole to really stick to exercising 4+ times per week, even if it’s a good deal compared to Soulcycle or whatever.

Also, if churn is as low as they say it is, why is Peloton starting to sell used bikes? I’m sure there is a good business reason for doing this, but there are very active and thriving used good sites (eBay, Craigslist, etc.) for people to offload these bikes. Why is Peloton going to buy these bikes back? At best, they will keep the price for their new bikes elevated by controlling supply of used bikes and at worst, they are essentially buying back obsolete inventory to keep sales of their new products going, which could turn into a balance sheet problem at some point (admittedly distant given the $1 billion in cash they have).

 https://finance.yahoo.com/news/peloton-will-start-selling-used-bikes-soon-215849632.html (https://finance.yahoo.com/news/peloton-will-start-selling-used-bikes-soon-215849632.html)


But what do I know? Trees do grow to the sky and there are tons of examples of exercise equipment/classes that have had staying power.

There’s a lot of terminal value built into the current price, and there’s a good argument that the market is valuing this company at a peak multiple of peak (at least a cyclical if not secular peak) revenues.

Not alone at all. I think we are close to seeing peak revenues, likely within the next 12 months. Its definitely a fad product. There is a passionate base but the COVID trade you've seen here just pulled ahead future sales. No different than what occurred with applicable discretionary spend items in other places such as boats and RVs. You have an extraordinary one off situation where people are more or less imprisoned in their homes and even once let out, stuck in their states/regions. Gyms are closed, cities shut down. Constant focus on "health". There isn't anything more you could dream up to pump something like this, but let it play out first. A short without a catalyst usually just ends up being a tax write off. Unless you believe the future holds a place for a $30B exercise bike company that streams Youtube videos...
Title: Re: PTON - Peloton
Post by: Broeb22 on September 10, 2020, 07:35:09 PM
This is just one of many old economy piggies wearing Saas lipstick

But it doesn’t include the out right frauds or the merely overvalued Saas companies that offer a product and not a platform whose best hope is to be bought out by one of the platforms before people wake up to the reality that their TAMs aren’t that huge.

Since you brought up Peloton’s videos, how about ZM’s $100 billion videoconferencing business? Is that a product or a platform? Where do they go from here to become stickier inside enterprises? How hard was/is it for most people to switch to Microsoft Teams at no additional cost to existing MSFT suite? I’ll tell you the sleepy company I worked for dropped a ZM competitor like a bad habit when Teams was introduced. Idk that people are giving MSFT any additional credit for rolling out Teams but yeah ZM is definitely here to stay and it’s long term dominance is unquestioned. I almost yearn for the days when MSFT could buy Skype for a modest $9 billion. Based on ZM, MSFT should have a 10 bagger in less than 10 years.

Maybe they should spin off their Teams business because it will create value? Oh wait, it won’t because no one wants to have 1,000 point solutions to run their IT dept or business.
Title: Re: PTON - Peloton
Post by: Jurgis on September 10, 2020, 07:56:05 PM
This is just one of many old economy piggies wearing Saas lipstick

But it doesn’t include the out right frauds or the merely overvalued Saas companies that offer a product and not a platform whose best hope is to be bought out by one of the platforms before people wake up to the reality that their TAMs aren’t that huge.

Since you brought up Peloton’s videos, how about ZM’s $100 billion videoconferencing business? Is that a product or a platform? Where do they go from here to become stickier inside enterprises? How hard was/is it for most people to switch to Microsoft Teams at no additional cost to existing MSFT suite? I’ll tell you the sleepy company I worked for dropped a ZM competitor like a bad habit when Teams was introduced. Idk that people are giving MSFT any additional credit for rolling out Teams but yeah ZM is definitely here to stay and it’s long term dominance is unquestioned. I almost yearn for the days when MSFT could buy Skype for a modest $9 billion. Based on ZM, MSFT should have a 10 bagger in less than 10 years.

Maybe they should spin off their Teams business because it will create value? Oh wait, it won’t because no one wants to have 1,000 point solutions to run their IT dept or business.

I agree with you regarding PTON.

I also agree that Zoom will have tough time going forward. However, you are wrong that enterprises can just use MS Teams. MS Teams is great for small meetings. MS Teams does not handle large meetings. I believe 250 is max number on Teams and even close to that is dicey. Everything above that requires Zoom or Webex. Microsoft may implement large meeting handling though. And market for large meetings is not that big.
There are other markets where MS Teams don't work (well): across companies or just private meetings. But these are also likely not huge markets.
Title: Re: PTON - Peloton
Post by: LounginMKL on September 10, 2020, 11:40:27 PM
Allow me to be a devil's advocate. I recently bought a used Peloton right before the announcement of price drop (just my luck...) and here are a couple of observations.

- There are real social aspects of "the platform." Check out how many tribes (social groups) are there https://www.pelobuddy.com/pelothon-2020/
- The instructors are better than the ones I've experienced at our local spin class (I haven't tried SoulCycle/Flywheel)
- Its competitors, Nordictrack/Bowflex, are far behind on the software and the quality of classes
- Suburb housewives are getting into it in droves. Just browse the Peloton FB groups and you will see profiles likes of MerlotSpinner and PinoMama. Remember the BECKY portfolio and how there are many compounders in there? The suburb housewives with their tremendous purchasing power shouldn't be ignored (apologize in advance about the gross generalization)

Saying Peloton is just another home fitness equipment is like saying
AAPL is just another smartphone maker
TSLA is just another EV
LULU just makes commodity yoga pants
SBUX just sells burnt coffee
CMG competes with every other taco trucks

I see us repeating the same mistakes over and over again (me included, I've watched but not invested in any of the aforementioned names, except for AAPL). I see value investor's failure to appreciate lifestyle brands as a blind spot because we are frugal and value-conscious. You may not be the target market but that doesn't mean this is a fad.

As you can see, I'm trying adapt to the new thinking =)
Title: Re: PTON - Peloton
Post by: Dalal.Holdings on September 11, 2020, 04:12:57 AM
Allow me to be a devil's advocate. I recently bought a used Peloton right before the announcement of price drop (just my luck...) and here are a couple of observations.

- There are real social aspects of "the platform." Check out how many tribes (social groups) are there https://www.pelobuddy.com/pelothon-2020/
- The instructors are better than the ones I've experienced at our local spin class (I haven't tried SoulCycle/Flywheel)
- Its competitors, Nordictrack/Bowflex, are far behind on the software and the quality of classes
- Suburb housewives are getting into it in droves. Just browse the Peloton FB groups and you will see profiles likes of MerlotSpinner and PinoMama. Remember the BECKY portfolio and how there are many compounders in there? The suburb housewives with their tremendous purchasing power shouldn't be ignored (apologize in advance about the gross generalization)

Saying Peloton is just another home fitness equipment is like saying
AAPL is just another smartphone maker
TSLA is just another EV
LULU just makes commodity yoga pants
SBUX just sells burnt coffee
CMG competes with every other taco trucks

I see us repeating the same mistakes over and over again (me included, I've watched but not invested in any of the aforementioned names, except for AAPL). I see value investor's failure to appreciate lifestyle brands as a blind spot because we are frugal and value-conscious. You may not be the target market but that doesn't mean this is a fad.

As you can see, I'm trying adapt to the new thinking =)

Pretty much.
Title: Re: PTON - Peloton
Post by: Broeb22 on September 11, 2020, 04:28:58 AM
We’re all making probabilistic bets here, and honestly I’m not even making a bet on PTON, just trying to reconcile my own investment intuitions with what the market is saying.

I guess you have to wonder where does PTON make money, now and long-term?

For now, they are making a lot of money selling bikes and treadmills, similar to how Apple did early on. Long-term, they will slow to a steady state of bike sales (I would argue that steady state is likely a lot lower than the recent quarter) unless you are arguing people will jump at the chance to replace their bike every 2 years. Again, I don’t think people will be replacing $1,000-2,000 bikes every 2 years, and directionally I would say if even Apple had to make their batteries lose life just to sustain their replacement cycle then this is a safe assumption. A smartphone has a whole lot more technology changing than these bikes likely can or will.

So then you get to the software business. This is a $480 million run rate business based on their best quarter ever. If you think people don’t reload on the hardware very often, as I do, then depending on how you value ongoing hardware revenue you are valuing the Saas portion of this business at maybe 30-40x sales.

Most actual Saas companies only trade at 15-20x sales and you can argue about whether Saas as a whole should trade at those multiples. And subjectively but also let’s be honest kind of objectively PTON is a less sticky product (6% annual churn or higher) Long-term than most Saas enterprise softwares so it really doesn’t deserve to be valued at that same level.

Finally, what’s the ultimate long term value here? $100 billion? How do you get to that?

If someone can logically lay that out for me, you have a very risk 4-bagger in about 10-15 years, or a 15% IRR.

Using the comparisons you made, the SBUX, CMG, and LULU are probably most similar to PTON  in that they operate in fiercely competitive markets and somehow still make it work. These companies have been competing for decades, the newest LULU was founded in 1998. CMG and LULU trade for pretty high valuations themselves, north of 60x earnings, and the market is valuing their entire businesses at only slight premiums to PTON.

Maybe I’m the Luddite here who has it all wrong but there are so many higher quality, long-term defensible businesses out there at better valuations, why even mess with this?



Title: Re: PTON - Peloton
Post by: Gregmal on September 11, 2020, 05:05:19 AM
Allow me to be a devil's advocate. I recently bought a used Peloton right before the announcement of price drop (just my luck...) and here are a couple of observations.

- There are real social aspects of "the platform." Check out how many tribes (social groups) are there https://www.pelobuddy.com/pelothon-2020/
- The instructors are better than the ones I've experienced at our local spin class (I haven't tried SoulCycle/Flywheel)
- Its competitors, Nordictrack/Bowflex, are far behind on the software and the quality of classes
- Suburb housewives are getting into it in droves. Just browse the Peloton FB groups and you will see profiles likes of MerlotSpinner and PinoMama. Remember the BECKY portfolio and how there are many compounders in there? The suburb housewives with their tremendous purchasing power shouldn't be ignored (apologize in advance about the gross generalization)

Saying Peloton is just another home fitness equipment is like saying
AAPL is just another smartphone maker
TSLA is just another EV
LULU just makes commodity yoga pants
SBUX just sells burnt coffee
CMG competes with every other taco trucks

I see us repeating the same mistakes over and over again (me included, I've watched but not invested in any of the aforementioned names, except for AAPL). I see value investor's failure to appreciate lifestyle brands as a blind spot because we are frugal and value-conscious. You may not be the target market but that doesn't mean this is a fad.

As you can see, I'm trying adapt to the new thinking =)

I think this is reasonable. I dont disagree its a great, status type product/service combo. The problem with the above comps is that CMG can pick your pocket everyday. So can SBUX. LULU can sell you a wardrobe every year or two. AAPL has the device every two years, and the stuff inside the device.TSLA is a bit more complicated, but I can at least point to some add on's, not to mention highly valuable data they can collect from users. What element does PTON possess? They sell a clunky piece of hardware, likely once to somebody. I dont know how many cycles you can get out of replacing a stationary bike. So then whats left is the platform. You can make assumptions about TAM, but it's upper/middle class city folks it seems. Probably some suburb mix too. You are talking households, not people because everyone has access with the subscription. So I think the number is ultimately smaller that what people think and even being generous, this current valuation is a little nuts. A better comp I think is probably Sodastream, which ended up being both a fad, and a decent investment. Sell the hardware and then collect $20 per month on CO2 from the users. Except the public lifecycle for that, was a U. The fad valuation eventually collapsed and the business had to reconcile it's bottom line with the price people would pay for its shares. What's going on now in the markets is very different in that almost every company in certain spaces is being given instant credit for becoming the "idea" of what they aspire to be 5-10 years from now. Its a crazy, but ultimately very fun market. So of course, the best advice is to not get upset over valuations, and just have some fun with it; cautiously of course. But I dont think the new normal is 20x sales for everybody and at some point the chickens come home to roost.
Title: Re: PTON - Peloton
Post by: A Dhandho Investor on September 11, 2020, 05:18:36 AM
I agree with Broeb22 and Gregmal on this one.

@LounginMKL: the issue I see with your way of thinking / the below post is that basically you are just ignoring valuation.

Maybe it is a great company, but why would you invest in it at this price level?

Allow me to be a devil's advocate. I recently bought a used Peloton right before the announcement of price drop (just my luck...) and here are a couple of observations.

- There are real social aspects of "the platform." Check out how many tribes (social groups) are there https://www.pelobuddy.com/pelothon-2020/
- The instructors are better than the ones I've experienced at our local spin class (I haven't tried SoulCycle/Flywheel)
- Its competitors, Nordictrack/Bowflex, are far behind on the software and the quality of classes
- Suburb housewives are getting into it in droves. Just browse the Peloton FB groups and you will see profiles likes of MerlotSpinner and PinoMama. Remember the BECKY portfolio and how there are many compounders in there? The suburb housewives with their tremendous purchasing power shouldn't be ignored (apologize in advance about the gross generalization)

Saying Peloton is just another home fitness equipment is like saying
AAPL is just another smartphone maker
TSLA is just another EV
LULU just makes commodity yoga pants
SBUX just sells burnt coffee
CMG competes with every other taco trucks

I see us repeating the same mistakes over and over again (me included, I've watched but not invested in any of the aforementioned names, except for AAPL). I see value investor's failure to appreciate lifestyle brands as a blind spot because we are frugal and value-conscious. You may not be the target market but that doesn't mean this is a fad.

As you can see, I'm trying adapt to the new thinking =)
Title: Re: PTON - Peloton
Post by: Dalal.Holdings on September 11, 2020, 06:24:15 AM
I’ll go ahead and make a “laughable” analogy—like the one I made a couple of years back comparing old AAPL to TSLA (Worked out well for me):

PTON is more akin to NFLX albeit with a smaller TAM but in this case folks are willing to buy equipment worth thousands of dollars from them for the privilege of streaming their content.

The moat is much wider than Zoom. The best consumer products seem like fads in their early stages.

I’m sure I’ll be mocked for this, but oh well.
Title: Re: PTON - Peloton
Post by: Castanza on September 11, 2020, 06:27:54 AM
You can like the product and hate the investment. It's difficult to have any margin of safety when the foundation of a thesis is "consumers like this and I hope they continue to like it."
Title: Re: PTON - Peloton
Post by: thepupil on September 11, 2020, 06:33:56 AM
I’ll go ahead and make a “laughable” analogy—like the one I made a couple of years back comparing old AAPL to TSLA (Worked out well for me):

PTON is more akin to NFLX albeit with a smaller TAM but in this case folks are willing to buy equipment worth thousands of dollars from them for the privilege of streaming their content.

The moat is much wider than Zoom. The best consumer products seem like fads in their early stages.

I’m sure I’ll be mocked for this, but oh well.

i agree with this.

i don't own PTON, don't think it's worth $30B, but think there is a serious moat being built here and significant scale / network advantage to PTON versus its competition (only wrt indoor cycling) that could potentially be expanded to broader fitness. think that over time they could pick off other emerging players and eventually offer a bundled "fitness at home suite" that's a huge value proposition. think there's long term international potential that's pretty wide open.

we are a soulcycle at home / variis household, but we are the outlier. each of our neighbors has a peloton, 1/2 of my fraternity brothers have pelotons; several of their parents have 2. strength is begetting stength. more classes. more funding, more users, bigger budget for top trainers / adjacencies etc.

if you asked me is PTON worth $30B? I'd take the under. but unlike a  lot of things, i actually can understand the potential power of this growth story.

I think it's easy to underestimate how many people are happy to spend $40 / month for this. $480 / year of super high margin revenue on 1mm, 2mm, 3mm people, funds a lot of optionality. i also think it's easy to underestimate how many people will by a $2,500 bike that you think can't or shouldn't. 0% financing is the american way and that's one huge blunder on Variis / soulcycles part (only cash).

I'm aware of at least 2 decent fundamental l/s funds that have been inclined to short this, then dug in, and gone long.
Title: Re: PTON - Peloton
Post by: arcube on September 11, 2020, 06:38:11 AM
I’ll go ahead and make a “laughable” analogy—like the one I made a couple of years back comparing old AAPL to TSLA (Worked out well for me):

PTON is more akin to NFLX albeit with a smaller TAM but in this case folks are willing to buy equipment worth thousands of dollars from them for the privilege of streaming their content.

The moat is much wider than Zoom. The best consumer products seem like fads in their early stages.

I’m sure I’ll be mocked for this, but oh well.

i agree with this.

i don't own PTON, don't think it's worth $30B, but think there is a serious moat being built here and significant scale / network advantage to PTON versus its competition (only wrt indoor cycling) that could potentially be expanded to broader fitness. think that over time they could pick off other emerging players and eventually offer a bundled "fitness at home suite" that's a huge value proposition. think there's long term international potential that's pretty wide open.

we are a soulcycle at home / variis household, but we are the outlier. each of our neighbors has a peloton, 1/2 of my fraternity brothers have pelotons; several of their parents have 2. strength is begetting stength. more classes. more funding, more users, bigger budget for top trainers / adjacencies etc.

if you asked me is PTON worth $30B? I'd take the under. but unlike a  lot of things, i actually can understand the potential power of this growth story.

I think it's easy to underestimate how many people are happy to spend $40 / month for this. $480 / year of super high margin revenue on 1mm, 2mm, 3mm people, funds a lot of optionality. i also think it's easy to underestimate how many people will by a $2,500 bike that you think can't or shouldn't. 0% financing is the american way and that's one huge blunder on Variis / soulcycles part (only cash).

I'm aware of at least 2 decent fundamental l/s funds that have been inclined to short this, then dug in, and gone long.

+1.
Title: Re: PTON - Peloton
Post by: thepupil on September 11, 2020, 06:51:08 AM
i think where i really failed is that I failed to see that if a dumb value oriented guy like me can understand the thesis, then surely this market would be excited by and "understand" the thesis by a factor of 2-3x and therefore the stock was retrospectively cheap. perhaps thats still the case
Title: Re: PTON - Peloton
Post by: KJP on September 11, 2020, 07:10:27 AM

i don't own PTON, don't think it's worth $30B, but think there is a serious moat being built here and significant scale / network advantage to PTON versus its competition (only wrt indoor cycling) that could potentially be expanded to broader fitness. think that over time they could pick off other emerging players and eventually offer a bundled "fitness at home suite" that's a huge value proposition. think there's long term international potential that's pretty wide open.

...

I think it's easy to underestimate how many people are happy to spend $40 / month for this. $480 / year of super high margin revenue on 1mm, 2mm, 3mm people, funds a lot of optionality. i also think it's easy to underestimate how many people will by a $2,500 bike that you think can't or shouldn't. 0% financing is the american way and that's one huge blunder on Variis / soulcycles part (only cash).


$40/month is cheap compared to, for example, CrossFit, which some people seem to stick with for several years because of the community aspect.  That level of community cannot be fully replicated online, but the more Peloton can generate a community feeling the better.  I agree it's also essential to expand the offering beyond cycling, because I think many people get bored and want to change up their routine.  Although some people will keep at it, I think many people won't cycle for 5 - 10 years straight.  So I think they're going to have a churn problem unless they can have a full fitness offering, and even then churn may be an issue for the reasons stated above.
Title: Re: PTON - Peloton
Post by: A Dhandho Investor on September 11, 2020, 07:17:08 AM
i think where i really failed is that I failed to see that if a dumb value oriented guy like me can understand the thesis, then surely this market would be excited by and "understand" the thesis by a factor of 2-3x and therefore the stock was retrospectively cheap. perhaps thats still the case

In my humble opinion you don't fail if you stick to your personal investment approach.

Why would you enter into a Keynesian beauty contest where you buy a stock because you think other people will like it more once they "understand the investment thesis"?

I saw a Twitter post by a "value investor" stating "the day SpaceX IPO's I will definitely buy the stock because there will be a ton of fans that is also eagerly waiting to buy the stock".

Buying in a stock because you like the underlying business without looking at the valuation is just speculation based on (1) the greater fool theory or (2) hope that the investment thesis will work out eventually and the company will grow into its current valuation. imo you can throw > 90% of the SAAS space in the second bucket.
Title: Re: PTON - Peloton
Post by: deleuze68 on September 11, 2020, 07:29:34 AM
Echoing some of the prior comments, I'm not a buyer at this valuation but I wouldn't short it either. The brand has a captive audience, is accumulating cash, and can borrow for dirt cheap. In many ways this will be a bet on management - can the company leverage its brand power (peloton as lifestyle) to profitably expand its offering and reach. The bull case is in 10 years people will be saying, "remember when Peloton was just an exercise bike?"
Title: Re: PTON - Peloton
Post by: Gregmal on September 11, 2020, 07:35:13 AM
i think where i really failed is that I failed to see that if a dumb value oriented guy like me can understand the thesis, then surely this market would be excited by and "understand" the thesis by a factor of 2-3x and therefore the stock was retrospectively cheap. perhaps thats still the case

In my humble opinion you don't fail if you stick to your personal investment approach.

Why would you enter into a Keynesian beauty contest where you buy a stock because you think other people will like it more once they "understand the investment thesis"?

I saw a Twitter post by a "value investor" stating "the day SpaceX IPO's I will definitely buy the stock because there will be a ton of fans that is also eagerly waiting to buy the stock".

Buying in a stock because you like the underlying business without looking at the valuation is just speculation based on (1) the greater fool theory or (2) hope that the investment thesis will work out eventually and the company will grow into its current valuation. imo you can throw > 90% of the SAAS space in the second bucket.

To be fair, playing "pass the hot potato" has now worked wonders for nearly a decade, and fully gone into overdrive TTM. If all the RobinHoods can do it, surely a reasonably well versed financial professional/sophisticated investor can find a way to make a few beans off the same strategy... End of the day, everyones just trying to make money. The question of strategy really just comes down to sustainability. Its been kind of easy to see certain things have long runways for the "story". You've got an awesome story, reasonably large TAM, and no real chicken come home to roost/show me the profits expectation for the time being...the animal spirits will run wild=bad short. NVTA is another one that fits this bill.
Title: Re: PTON - Peloton
Post by: Jurgis on September 11, 2020, 08:01:58 AM
We thought of buying Mirror ( https://www.mirror.co/ ), but the functionality is actually much more basic than advertised. If anyone thinks this is going to be big, buy LULU and get Mirror for free.  ::)



Not buying PTON products, don't like indoor biking or running. If they start offering steppers/ellipticals, then maybe. Though likely not at their price point.
Title: Re: PTON - Peloton
Post by: BG2008 on September 11, 2020, 08:08:57 AM
Why would a bunch of "cheap ass" value investing nerds on an outdated investing forum understand the appeal of Peloton.  The users are largely busy housewives with 2-3 kids who can't go to the gym and they hop on the bike for 20 mins and then shower and their 3 workouts in for the week.  It's a way for them to stay sane and somewhat in shape.  If you don't understand the value proposition in something like that, then you guys are idiots. 

Value nerds by definition are not good with retail or why certain seemingly higher price point products/services appeal to women such as LuluLemon.  I've bought a few pairs.  They are great shorts.  I wear them all the time.
Title: Re: PTON - Peloton
Post by: arcube on September 11, 2020, 08:10:51 AM
The users are largely busy housewives with 2-3 kids who can't go to the gym and they hop on the bike for 20 mins and then shower and their 3 workouts in for the week.  It's a way for them to stay sane and somewhat in shape.  If you don't understand the value proposition in something like that, then you guys are idiots. 

Nailed it. : )
Title: Re: PTON - Peloton
Post by: Jurgis on September 11, 2020, 08:17:30 AM
Just for the tally: how many of the PTON expert bulls bought the stock (early) this year and held/continue to hold?
Edit: or have you bought it now that the bull thesis is even more confirmed?

"Cheap ass" value investing nerd who does not wear shorts  ::) wants to know.
Title: Re: PTON - Peloton
Post by: A Dhandho Investor on September 11, 2020, 08:23:40 AM
Why would a bunch of "cheap ass" value investing nerds on an outdated investing forum understand the appeal of Peloton.  The users are largely busy housewives with 2-3 kids who can't go to the gym and they hop on the bike for 20 mins and then shower and their 3 workouts in for the week.  It's a way for them to stay sane and somewhat in shape.  If you don't understand the value proposition in something like that, then you guys are idiots. 

Value nerds by definition are not good with retail or why certain seemingly higher price point products/services appeal to women such as LuluLemon.  I've bought a few pairs.  They are great shorts.  I wear them all the time.

I invested in Xpel, which basically (it's more than that, but let's keep it simple) is in the business of selling $4k car wraps to retail buyers. I wouldn't immediately buy their product myself, but why do you believe a value investor wouldn't understand the economics of a business like that? The thing is, when I initially built my position, it was basically trading at 1 x revenues (now > 5 x revenues).

I would say that the part where value investing comes into play is the link between the unit economics / business economics / value proposition and the actual market valuation of the company. Coincidently, you don't make that link in your post.
Title: Re: PTON - Peloton
Post by: Foreign Tuffett on September 11, 2020, 08:53:15 AM
Why would a bunch of "cheap ass" value investing nerds on an outdated investing forum understand the appeal of Peloton.  The users are largely busy housewives with 2-3 kids who can't go to the gym and they hop on the bike for 20 mins and then shower and their 3 workouts in for the week.  It's a way for them to stay sane and somewhat in shape.  If you don't understand the value proposition in something like that, then you guys are idiots. 

Value nerds by definition are not good with retail or why certain seemingly higher price point products/services appeal to women such as LuluLemon.  I've bought a few pairs.  They are great shorts.  I wear them all the time.

I think the posters here largely grok Peloton's appeal to the general public, even if (like me) they have zero personal interest in the product.

I think the skepticism is because the entire history of the consumer exercise equipment industry is the history of one fad after another.  If Peloton bikes are still relevant in 10 or 20 years the company will have really beaten the odds.

https://www.usatoday.com/story/life/people/2018/07/12/biggest-fitness-fad-year-you-were-born/780962002/ (https://www.usatoday.com/story/life/people/2018/07/12/biggest-fitness-fad-year-you-were-born/780962002/)

It wasn't that long ago that seemingly every suburban American house had a Bowflex home gym machine in the garage. How about the glorious device that was the Gazelle Freestyle? Anybody still watching their Jane Fonda VHS tapes? How about Billy Blanks' Taebo or P90X? Chest Expander? Geez, even the definitive biography of Buffett, our patron saint, contains an account of his brief infatuation with Bob Hoffman and York Barbell.
Title: Re: PTON - Peloton
Post by: Read the Footnotes on September 11, 2020, 09:08:29 AM
I have a friend who is a very serious triathlete, who very sheepishly admitted to having bought a Peloton and really liking it. He is not at all part of what is assumed to be their target market.

If they have a chance to be successful with serious male athletes and cyclists, that would expand their market substantially and mean that the runway is nowhere near exhausted.
Title: Re: PTON - Peloton
Post by: Jurgis on September 11, 2020, 10:18:29 AM
How about the glorious device that was the Gazelle Freestyle?

I have to sheepishly admit that we bought Gazelle in 2018. Wife uses it once in a blue moon. I get seasickness on it after 1 minute.  ::)
Title: Re: PTON - Peloton
Post by: arcube on September 11, 2020, 10:23:26 AM
It wasn't that long ago that seemingly every suburban American house had a Bowflex home gym machine in the garage. How about the glorious device that was the Gazelle Freestyle? Anybody still watching their Jane Fonda VHS tapes? How about Billy Blanks' Taebo or P90X? Chest Expander? Geez, even the definitive biography of Buffett, our patron saint, contains an account of his brief infatuation with Bob Hoffman and York Barbell.

IMO - Not a valid comparison with a live and connected device with huge community aspects. I went long earlier this year and the only regret I have is that I did not back the truck on this one.
Title: Re: PTON - Peloton
Post by: Broeb22 on September 11, 2020, 10:25:40 AM
I have a friend who is a very serious triathlete, who very sheepishly admitted to having bought a Peloton and really liking it. He is not at all part of what is assumed to be their target market.

If they have a chance to be successful with serious male athletes and cyclists, that would expand their market substantially and mean that the runway is nowhere near exhausted.

Why would you think that a triathlete would not be part of the target market? I feel like any adult that is reasonably wealthy and bikes at least once a week is the target market.
Title: Re: PTON - Peloton
Post by: Jurgis on September 11, 2020, 10:28:35 AM
IMO - Not a valid comparison with a live and connected device with huge community aspects. I went long earlier this year and the only regret I have is that I did not back the truck on this one.

OK, at least one bull responded with actual "I'm long". /respect

The community aspect is a two edged sword. It's great and positively reinforcing if/when it is growing. But community can collapse too if people move on to something different. With that being said, I'm not expecting PTON sales/subs to collapse for ~2 years at least. There is still lockdown and scarcity factor. So we have until ~2021 end for increasing sales/participation. If it goes down (in sales/subs), it will go down in 2022-2023 timeframe. JMO. (Note that I don't predict how/where stock price will go)
Title: Re: PTON - Peloton
Post by: arcube on September 11, 2020, 10:38:46 AM
IMO - Not a valid comparison with a live and connected device with huge community aspects. I went long earlier this year and the only regret I have is that I did not back the truck on this one.

OK, at least one bull responded with actual "I'm long". /respect

The community aspect is a two edged sword. It's great and positively reinforcing if/when it is growing. But community can collapse too if people move on to something different. With that being said, I'm not expecting PTON sales/subs to collapse for ~2 years at least. There is still lockdown and scarcity factor. So we have until ~2021 end for increasing sales/participation. If it goes down (in sales/subs), it will go down in 2022-2023 timeframe. JMO. (Note that I don't predict how/where stock price will go)

Fair enough. I do believe this is a big platform in making that will have some stickiness with the existing consumer base. The management team here is solid too. I also think if Tim Cook had to do a marquee acquisition, this would be it but that guy has been sitting on his ass for a long time.
Title: Re: PTON - Peloton
Post by: Dalal.Holdings on September 11, 2020, 10:57:15 AM
I’ve been long since the mid 30s. Wasn’t too long ago. Won’t bother annualizing the gains.

Turns out you can do just fine holding some highly asymmetric plays like this and a chunk of cash as well. Call it a “barbell” if you must.

I don’t see any viable competitors on their tail. Mirror seems like an expensive toy. NordicTrack is like GM taking a swing at EVs...with the same expected result. Peloton has a strong motivational setup where it increases the probability that the user will come back for more exercise...invaluable in this space and something very hard to achieve. Usually you need cults like crossfit or something similar to achieve it. PTON seems to have found another way—almost turning it into a competitive video game.

The best part? They’ve started by aiming at the ultra high end/expensive part of the exercise space—spin classes.
Title: Re: PTON - Peloton
Post by: Gregmal on September 11, 2020, 11:20:01 AM
IMO - Not a valid comparison with a live and connected device with huge community aspects. I went long earlier this year and the only regret I have is that I did not back the truck on this one.

OK, at least one bull responded with actual "I'm long". /respect

The community aspect is a two edged sword. It's great and positively reinforcing if/when it is growing. But community can collapse too if people move on to something different. With that being said, I'm not expecting PTON sales/subs to collapse for ~2 years at least. There is still lockdown and scarcity factor. So we have until ~2021 end for increasing sales/participation. If it goes down (in sales/subs), it will go down in 2022-2023 timeframe. JMO. (Note that I don't predict how/where stock price will go)

Fair enough. I do believe this is a big platform in making that will have some stickiness with the existing consumer base. The management team here is solid too. I also think if Tim Cook had to do a marquee acquisition, this would be it but that guy has been sitting on his ass for a long time.

I dont know about you, but I think many shareholders, would be quite happy if the majority of CEOs just boringly sat on their ass and returned capital to shareholders the way Cook has, rather than go on acquisition driven, kingdom building sprees. Based on the results, its hard to say Cook's approach hasn't worked either.
Title: Re: PTON - Peloton
Post by: deleuze68 on September 11, 2020, 11:23:25 AM
I have a friend who is a very serious triathlete, who very sheepishly admitted to having bought a Peloton and really liking it. He is not at all part of what is assumed to be their target market.

If they have a chance to be successful with serious male athletes and cyclists, that would expand their market substantially and mean that the runway is nowhere near exhausted.

Why would you think that a triathlete would not be part of the target market? I feel like any adult that is reasonably wealthy and bikes at least once a week is the target market.

Well a serious cyclist/triathlete already has their $5K+ bike custom fitted and a trainer in their basement/garage. If they need any motivation for their workout they'll use Zwift. Peloton will never capture this market but they can capture the bucket list or maybe hobbyist triathlete.
Title: Re: PTON - Peloton
Post by: Castanza on September 11, 2020, 11:49:17 AM
I think some overplay the "community" aspects. How much of a community is it actually? You can't hit on guys and girls, you don't meet other people. You hide behind a forum and some performance numbers. Maybe every 10 rides you will have the instructor yell out on live stream "pick up the pace OneBallLance42069!". I don't really see the value in that. The best thing Peloton does is build aesthetically attractive bikes that have solid software for performance tracking. Right now a Peloton is a status symbol like all exercise equipment that has come before it. How long the fad can last I don't know. I now have three friends who have purchased Pelotons. Upon hanging out with each of them I was greeted with the phrase "come check out my Peloton." Couldn't help but sense the buyers remorse and clout fishing.

Personally I think something like https://www.whoop.com/ (https://www.whoop.com/) is more likely take off long term. It's not confined to any one activity and still introduces the community aspects of competition.

Until a piece of exercise equipment mimics the Disney Animal Kingdom ride experience "Flight of Passage", I will continue to be on the fad train. Even then I would be skeptical long term.
Title: Re: PTON - Peloton
Post by: Gregmal on September 11, 2020, 12:06:11 PM
Everything always seems the most legitimate/obvious during the peak of the craze.....It is sometimes important not to let price action(often determined by patsies) allow one to convince oneself that the fundamentals and thesis is confirmed. As mentioned prior, ZM....The headlines around Zoom's earnings were outrageous. What exactly did folks expect given what occurred in Q2? Bad numbers? Same sort of thing applies here. Shut gyms. Lock people in their homes. Start imposing regional bans. Shut everything else there is to do as well. And we are shocked sales went gangbusters? This Q, as well as the next one or two Qs will IMO be hard to ever replicate and the window to really capture and monetize a user base will be now. If you triple the active users, and assume at maturity they can improve margins significantly, whats that number and the multiple for that? GoPro not too long at, again at the height of the insanity, was a "lifestyle", "status", "media/interactive" company too....
Title: Re: PTON - Peloton
Post by: jondoug on September 11, 2020, 12:12:28 PM
I think the comparison with NFLX is more apt for Peloton. At $12.99, the digital membership gives you top notch streaming classes (on demand and live) that you could get a quick workout whenever you need at the convenience of your home. Yes, there are YouTube videos and other free options, but the consistency, variety and the quality you get from Peloton is worth the $12.99 for a lot of folks.

I believe the digital membership numbers will grow consistently. And, it is a great way to acquire customers for the hardware side of the business.

Also, Peloton has already shown it can scale easily from Biking to running to HIIT to yoga classes. It will be easy for them to keep adding whatever is the next fad in fitness classes.

I definitely wouldn't short it.
Title: Re: PTON - Peloton
Post by: Foreign Tuffett on September 11, 2020, 01:37:20 PM
Everything always seems the most legitimate/obvious during the peak of the craze.....It is sometimes important not to let price action(often determined by patsies) allow one to convince oneself that the fundamentals and thesis is confirmed. As mentioned prior, ZM....The headlines around Zoom's earnings were outrageous. What exactly did folks expect given what occurred in Q2? Bad numbers? Same sort of thing applies here. Shut gyms. Lock people in their homes. Start imposing regional bans. Shut everything else there is to do as well. And we are shocked sales went gangbusters? This Q, as well as the next one or two Qs will IMO be hard to ever replicate and the window to really capture and monetize a user base will be now. If you triple the active users, and assume at maturity they can improve margins significantly, whats that number and the multiple for that? GoPro not too long at, again at the height of the insanity, was a "lifestyle", "status", "media/interactive" company too....

Yeah, everyone should be careful to not just mindlessly extrapolate COVID-fueled trends forward.

Title: Re: PTON - Peloton
Post by: Jurgis on September 11, 2020, 02:09:21 PM
And you can get it over 4% cheaper than before earnings...  ;D
Title: Re: PTON - Peloton
Post by: Foreign Tuffett on September 11, 2020, 02:43:31 PM
I think the comparison with NFLX is more apt for Peloton. At $12.99, the digital membership gives you top notch streaming classes (on demand and live) that you could get a quick workout whenever you need at the convenience of your home. Yes, there are YouTube videos and other free options, but the consistency, variety and the quality you get from Peloton is worth the $12.99 for a lot of folks.

I believe the digital membership numbers will grow consistently. And, it is a great way to acquire customers for the hardware side of the business.

Also, Peloton has already shown it can scale easily from Biking to running to HIIT to yoga classes. It will be easy for them to keep adding whatever is the next fad in fitness classes.

I definitely wouldn't short it.

How is the Netflix comp "apt"? Netflix's universal appeal for consumers is obvious as nearly everyone in developed countries consumes scripted video content throughout their life, but Peloton's subscription service revolves around the hardware/exercise offering. Presumably customers will cancel their subs after they stop using the bike. 

 
Title: Re: PTON - Peloton
Post by: Jurgis on September 11, 2020, 03:28:07 PM
I think the comparison with NFLX is more apt for Peloton. At $12.99, the digital membership gives you top notch streaming classes (on demand and live) that you could get a quick workout whenever you need at the convenience of your home. Yes, there are YouTube videos and other free options, but the consistency, variety and the quality you get from Peloton is worth the $12.99 for a lot of folks.

I believe the digital membership numbers will grow consistently. And, it is a great way to acquire customers for the hardware side of the business.

Also, Peloton has already shown it can scale easily from Biking to running to HIIT to yoga classes. It will be easy for them to keep adding whatever is the next fad in fitness classes.

I definitely wouldn't short it.

How is the Netflix comp "apt"? Netflix's universal appeal for consumers is obvious as nearly everyone in developed countries consumes scripted video content throughout their life, but Peloton's subscription service revolves around the hardware/exercise offering. Presumably customers will cancel their subs after they stop using the bike.

I guess jondoug is saying that even people who don't buy a bike/treadmill, still will be attracted to PTON yoga/etc. classes on subscription.
This is interesting direction, but IMO premature. I'd think most people don't even know that they can sub to PTON yoga classes without buying a bike. PTON could push in this direction, but I'd think Mirror is likely more attractive proposition for anyone who wants to do aerobics/yoga/etc. Especially if Mirror (or similar contraption) gets more full-featured and gets a better feedback loop.
Title: Re: PTON - Peloton
Post by: Spekulatius on September 11, 2020, 03:49:13 PM
It wasn't that long ago that seemingly every suburban American house had a Bowflex home gym machine in the garage. How about the glorious device that was the Gazelle Freestyle? Anybody still watching their Jane Fonda VHS tapes? How about Billy Blanks' Taebo or P90X? Chest Expander? Geez, even the definitive biography of Buffett, our patron saint, contains an account of his brief infatuation with Bob Hoffman and York Barbell.

IMO - Not a valid comparison with a live and connected device with huge community aspects. I went long earlier this year and the only regret I have is that I did not back the truck on this one.

The, the community/ social aspect makes this a bit of a different proposition. I found the following excerpt from the last CC very impressive.
Quote
My favorite KPI is workouts represented by our Connected Fitness subscriptions. In the fourth quarter, workouts reached 76.8 million, up 333% year-over-year, equating to nearly 25 average workouts per Connected Fitness subscription per month compared to 12.0 workouts per subscription per month in the fourth quarter of last year. Our incredibly high engagement levels have resulted in continued low average net monthly Connected Fitness churn, which for the quarter and full year was 0.52% and 0.62%, respectively.

What’s the average monthly attendance for a gym membership , even a family membership? I guess it’s a whole lot less than 25.
Title: Re: PTON - Peloton
Post by: Read the Footnotes on September 11, 2020, 05:16:12 PM
I have a friend who is a very serious triathlete, who very sheepishly admitted to having bought a Peloton and really liking it. He is not at all part of what is assumed to be their target market.

If they have a chance to be successful with serious male athletes and cyclists, that would expand their market substantially and mean that the runway is nowhere near exhausted.

Why would you think that a triathlete would not be part of the target market? I feel like any adult that is reasonably wealthy and bikes at least once a week is the target market.

Well a serious cyclist/triathlete already has their $5K+ bike custom fitted and a trainer in their basement/garage. If they need any motivation for their workout they'll use Zwift. Peloton will never capture this market but they can capture the bucket list or maybe hobbyist triathlete.
Yes, bike fit is very important to a serious cyclist or triathlete, and you make some good points. If you're trying to win the race or win your age group or whatever, you want repeatability, and accuracy, which are more important than gimmicks. Plus you want specificity and transferability to race day. That's why I thought this case is remarkable. Trust me this guy is a serious cyclist. He has multiple expensive bikes, and I know he has at least one of the top indoor trainers already, because I sold it to him.

He was probably a little sheepish about telling me how much he likes his Peloton because he knows I've had two CompuTrainers in my basement for 15 years.  In their day, CompuTrainers were as expensive as Pelotons, but were geared toward only the most competitive of cyclists, and the graphics, and interface were consistently behind the times.

Another reason it was surprising to hear from a high level cyclist that he loves his new Peloton is that a while ago when doing research on Peloton, I spoke to some marketing specialists for indirect competitors to Peloton, and they basically said they thought Peloton would really be pulling a rabbit out of a hat in order to expand their market and I can't remember the specifics but they believed Peloton's market was roughly non-athletic women of a certain age who wanted to lose weight.

I'm not really interested in Peloton in any way, but I thought it was an interesting single data point and that I would pass it along.
Title: Re: PTON - Peloton
Post by: Broeb22 on September 11, 2020, 06:01:52 PM
It wasn't that long ago that seemingly every suburban American house had a Bowflex home gym machine in the garage. How about the glorious device that was the Gazelle Freestyle? Anybody still watching their Jane Fonda VHS tapes? How about Billy Blanks' Taebo or P90X? Chest Expander? Geez, even the definitive biography of Buffett, our patron saint, contains an account of his brief infatuation with Bob Hoffman and York Barbell.

IMO - Not a valid comparison with a live and connected device with huge community aspects. I went long earlier this year and the only regret I have is that I did not back the truck on this one.

The, the community/ social aspect makes this a bit of a different proposition. I found the following excerpt from the last CC very impressive.
Quote
My favorite KPI is workouts represented by our Connected Fitness subscriptions. In the fourth quarter, workouts reached 76.8 million, up 333% year-over-year, equating to nearly 25 average workouts per Connected Fitness subscription per month compared to 12.0 workouts per subscription per month in the fourth quarter of last year. Our incredibly high engagement levels have resulted in continued low average net monthly Connected Fitness churn, which for the quarter and full year was 0.52% and 0.62%, respectively.

What’s the average monthly attendance for a gym membership , even a family membership? I guess it’s a whole lot less than 25.

So either one person per household is cycling basically every day per month, or maybe 2 people are cycling every other day? Does that seem sustainable in a world where people aren’t locked inside their homes? Even 12 times per month pre-COVID is 3-4 exercises per week, not your average American.

Also, does anyone have views on if churn will go up or down by reducing bike prices? I’ll vote up.
Title: Re: PTON - Peloton
Post by: Spekulatius on September 11, 2020, 06:19:46 PM
It wasn't that long ago that seemingly every suburban American house had a Bowflex home gym machine in the garage. How about the glorious device that was the Gazelle Freestyle? Anybody still watching their Jane Fonda VHS tapes? How about Billy Blanks' Taebo or P90X? Chest Expander? Geez, even the definitive biography of Buffett, our patron saint, contains an account of his brief infatuation with Bob Hoffman and York Barbell.

IMO - Not a valid comparison with a live and connected device with huge community aspects. I went long earlier this year and the only regret I have is that I did not back the truck on this one.

The, the community/ social aspect makes this a bit of a different proposition. I found the following excerpt from the last CC very impressive.
Quote
My favorite KPI is workouts represented by our Connected Fitness subscriptions. In the fourth quarter, workouts reached 76.8 million, up 333% year-over-year, equating to nearly 25 average workouts per Connected Fitness subscription per month compared to 12.0 workouts per subscription per month in the fourth quarter of last year. Our incredibly high engagement levels have resulted in continued low average net monthly Connected Fitness churn, which for the quarter and full year was 0.52% and 0.62%, respectively.

What’s the average monthly attendance for a gym membership , even a family membership? I guess it’s a whole lot less than 25.

So either one person per household is cycling basically every day per month, or maybe 2 people are cycling every other day? Does that seem sustainable in a world where people aren’t locked inside their homes? Even 12 times per month pre-COVID is 3-4 exercises per week, not your average American.

Also, does anyone have views on if churn will go up or down by reducing bike prices? I’ll vote up.

Where are people “locked in their homes “. Is everyone living in a 30 story tower in Manhattan here?

Where I live, gyms have been open since June (NH) and July (MA). Lots of people have taken on jogging and other outdoors activities. now, I personally wouldn’t go into gym because of safety concerns, but that’s another story.

I am sure COVID-19 is a factor for Pelotons success, but I don’t think it is the only reason. More like a catalyst. They will probably have a great winter season because outdoors here won’t be much fun.

25 uses a month is certainly for an entire family, but then gain for a family paying 2k for a bike and $59/ month May actually be a good deal, if you really use it 25x a month. Lots of people pay $50/ month for a gym membership and barely show up.
Title: Re: PTON - Peloton
Post by: Gregmal on September 11, 2020, 06:42:06 PM
These results were Q2 though, which ended in June. And even in places that were open, capacity was reduced, and as you alluded to, there was apprehension to go out, period. Even if it was "allowed". So it's definitely something that helped. Does it have traction? I am sure it does. I'm sure there are dedicated users. But its the same type of effect we saw on grocery store numbers and boat sales. Things things got juiced by the ultimate catalyst, but simply pulled sales from the future. Of course this is a net positive, but if you are projecting high growth rates, for extended periods of time, off the back of these numbers, I think you will be disappointed. I am fine being wrong on this, but what growth do you expect for this Q, next year? What about the year after? At the current multiple, you need pretty robust growth, which I would probably wager, wanes as things return to normal over the next 12-18 months.
Title: Re: PTON - Peloton
Post by: BG2008 on September 11, 2020, 09:00:10 PM
These results were Q2 though, which ended in June. And even in places that were open, capacity was reduced, and as you alluded to, there was apprehension to go out, period. Even if it was "allowed". So it's definitely something that helped. Does it have traction? I am sure it does. I'm sure there are dedicated users. But its the same type of effect we saw on grocery store numbers and boat sales. Things things got juiced by the ultimate catalyst, but simply pulled sales from the future. Of course this is a net positive, but if you are projecting high growth rates, for extended periods of time, off the back of these numbers, I think you will be disappointed. I am fine being wrong on this, but what growth do you expect for this Q, next year? What about the year after? At the current multiple, you need pretty robust growth, which I would probably wager, wanes as things return to normal over the next 12-18 months.

Your imaginations suck big time

This is a Fitness As a Service or FaaS company.  It deserves to trade at 30x NTM Price to Sub Rev multiple.  Fight me. 

You can get stretching, bodyweight, yoga, meditation, biking, treads, etc.  I'll bet a 24 pack of Budlight that they will add kettlebell workouts in the next 12 months.   

For the price of $40 for the subscription and you get a suite of workouts and a random shoutout from Robin the instructor, this is a bargain. 

Health is wealth, sex appeals get free dinners, and you can post your before and after photos on social media for a ton of likes.  What don't you guys get? 
Title: Re: PTON - Peloton
Post by: Gregmal on September 12, 2020, 07:28:38 AM
These results were Q2 though, which ended in June. And even in places that were open, capacity was reduced, and as you alluded to, there was apprehension to go out, period. Even if it was "allowed". So it's definitely something that helped. Does it have traction? I am sure it does. I'm sure there are dedicated users. But its the same type of effect we saw on grocery store numbers and boat sales. Things things got juiced by the ultimate catalyst, but simply pulled sales from the future. Of course this is a net positive, but if you are projecting high growth rates, for extended periods of time, off the back of these numbers, I think you will be disappointed. I am fine being wrong on this, but what growth do you expect for this Q, next year? What about the year after? At the current multiple, you need pretty robust growth, which I would probably wager, wanes as things return to normal over the next 12-18 months.

Your imaginations suck big time

This is a Fitness As a Service or FaaS company.  It deserves to trade at 30x NTM Price to Sub Rev multiple.  Fight me. 

You can get stretching, bodyweight, yoga, meditation, biking, treads, etc.  I'll bet a 24 pack of Budlight that they will add kettlebell workouts in the next 12 months.   

For the price of $40 for the subscription and you get a suite of workouts and a random shoutout from Robin the instructor, this is a bargain. 

Health is wealth, sex appeals get free dinners, and you can post your before and after photos on social media for a ton of likes.  What don't you guys get?

This is true, and certainly a bargain compared to my $170 a month Lifetime Fitness membership I used to have. I am sure the tipping point for me would be when PTON rolls out the "work out with MILFs" version everyday from 10am-11:30am. I would also like to see the virtual swimming pool option added on.
Title: Re: PTON - Peloton
Post by: Spekulatius on September 12, 2020, 10:16:31 AM
Some thing died inside me, when I read about a $170/month gym membership.
Quote
This is true, and certainly a bargain compared to my $170 a month Lifetime Fitness membership I used to have.

Best deal I had with a gym was a membership with 24h fitness, that was prepaid for 3 years and cost $800 (this deal was available in the slow time of the year in June/July typically) about 15 years ago. That was cheap, but the great thing about this was an extension option where after 3 years you could extend the deal for another year for $60. I extended mine for about 10 years  Until I sadly moved in an area without 24h fitness. 24h fitness is not a high end gym, but the instructors were actually really good and classes were included in above. Even towel service was free.

After that, paying $30/ month for NY Sports club (a much worse fitness studio) felt like a big ripoff. Now, I have a small home fitness studio, but I miss the motivational aspect of instructors. Perhaps there is a Peloton bike In my future...
Title: Re: PTON - Peloton
Post by: Pelagic on September 12, 2020, 11:24:52 AM
Some thoughts. I think there's a growing and largely untapped market in people new to exercising or who are self conscious about going to the gym/exercising in public. If PTON makes exercising easy (it does) and private (again, it does) then there's a userbase out there that might be willing to give it a shot. People spend thousands on diets and nutritional counseling, spending an equivalent amount on a PTON isn't that big of a stretch. I have no doubt PTON will also include nutritionists (if it doesn't already) into its platform for a complete experience.

The social aspect is important too. Imagine overlaying a game like Mario Kart into PTON where you're pedaling or running on their treadmill and competing against friends. Maybe even scaled based on your past performance to level the playing field between competitors. If PTON becomes a group activity and a way for distant/busy friend groups to stay connected, I wouldn't bet against them.
Title: Re: PTON - Peloton
Post by: merkhet on September 12, 2020, 11:37:02 AM
Allow me to be a devil's advocate. I recently bought a used Peloton right before the announcement of price drop (just my luck...) and here are a couple of observations.

- There are real social aspects of "the platform." Check out how many tribes (social groups) are there https://www.pelobuddy.com/pelothon-2020/
- The instructors are better than the ones I've experienced at our local spin class (I haven't tried SoulCycle/Flywheel)
- Its competitors, Nordictrack/Bowflex, are far behind on the software and the quality of classes
- Suburb housewives are getting into it in droves. Just browse the Peloton FB groups and you will see profiles likes of MerlotSpinner and PinoMama. Remember the BECKY portfolio and how there are many compounders in there? The suburb housewives with their tremendous purchasing power shouldn't be ignored (apologize in advance about the gross generalization)

Saying Peloton is just another home fitness equipment is like saying
AAPL is just another smartphone maker
TSLA is just another EV
LULU just makes commodity yoga pants
SBUX just sells burnt coffee
CMG competes with every other taco trucks

I see us repeating the same mistakes over and over again (me included, I've watched but not invested in any of the aforementioned names, except for AAPL). I see value investor's failure to appreciate lifestyle brands as a blind spot because we are frugal and value-conscious. You may not be the target market but that doesn't mean this is a fad.


As you can see, I'm trying adapt to the new thinking =)

Why would a bunch of "cheap ass" value investing nerds on an outdated investing forum understand the appeal of Peloton.  The users are largely busy housewives with 2-3 kids who can't go to the gym and they hop on the bike for 20 mins and then shower and their 3 workouts in for the week.  It's a way for them to stay sane and somewhat in shape.  If you don't understand the value proposition in something like that, then you guys are idiots. 

Value nerds by definition are not good with retail or why certain seemingly higher price point products/services appeal to women such as LuluLemon.  I've bought a few pairs.  They are great shorts.  I wear them all the time.

+1000

This forum is super heavy on males, so it’s not super surprising that we would collectively miss on a number of companies whose products are primarily geared towards females. It’s also super heavy on people who are generally frugal, which again means there’s a huge blind spot for luxury goods.
Title: Re: PTON - Peloton
Post by: Gregmal on September 12, 2020, 11:47:51 PM
Some thing died inside me, when I read about a $170/month gym membership.
Quote
This is true, and certainly a bargain compared to my $170 a month Lifetime Fitness membership I used to have.

Best deal I had with a gym was a membership with 24h fitness, that was prepaid for 3 years and cost $800 (this deal was available in the slow time of the year in June/July typically) about 15 years ago. That was cheap, but the great thing about this was an extension option where after 3 years you could extend the deal for another year for $60. I extended mine for about 10 years  Until I sadly moved in an area without 24h fitness. 24h fitness is not a high end gym, but the instructors were actually really good and classes were included in above. Even towel service was free.

After that, paying $30/ month for NY Sports club (a much worse fitness studio) felt like a big ripoff. Now, I have a small home fitness studio, but I miss the motivational aspect of instructors. Perhaps there is a Peloton bike In my future...

Eh, you only have your 20's once. No responsibilities and too much money is a fun problem to have. For $170, it was certainly overpriced, but not as much as it seems. Had an olympic sized swimming pool, basketball court, two floors of exercise machinery, spa, and a good bit more. Atmosphere was incredible. I grew out of it and now have a personal trainer which runs $225 a month but is definitely worth it. I cant get the same work out on my own so the cost is what it is.

As for PTON, my wife is due in about 6 weeks, so she's already asked and will receive one for Xmas...I will try to keep updated on the anecdotal bs, but I just dont see $30B here, unless $30B is the new $1B. My local athletic club runs $50 a month and of course there are the 24 Hour types doing $25 a month deals. For the workout nuts, sure, any price works. But for average folks, this stuff comes and goes like New Years resolutions. $30 a month or whatever aint $10 like Netflix. People will grow out of it and cancel. Although it took me 3 months of not attending once before I got off my ass at Lifetime and their $170  hitting my card, so maybe there will be a 6-12 month lag.
Title: Re: PTON - Peloton
Post by: BG2008 on September 14, 2020, 02:03:46 PM
Guys, I'm lightly trolling.  But I do think it is important to try to see the other side.  The markets have been more rational in valuation than we give it credit for tech companies. 
Title: Re: PTON - Peloton
Post by: Gregmal on September 14, 2020, 02:41:52 PM
I guess it just depends what you consider a "tech" company.

EDIT: breaking news, Camping World just announced plans for a peer to peer RV rental platform! Techify it baby. Up more than 10x from the March lows, this baby now should have another 3-5x upside given the new RVAAS angle to it!
Title: Re: PTON - Peloton
Post by: Spekulatius on September 14, 2020, 04:40:13 PM
I guess it just depends what you consider a "tech" company.

EDIT: breaking news, Camping World just announced plans for a peer to peer RV rental platform! Techify it baby. Up more than 10x from the March lows, this baby now should have another 3-5x upside given the new RVAAS angle to it!

I think RV’s are more likely a fad than Peloton bikes in my opinion.
Title: Re: PTON - Peloton
Post by: johnny on September 15, 2020, 12:29:33 AM
Haven't looked at this company, but just bought the new bike for my wife, who made it known this was to be the purchase and exhibited a psychotic belligerence to my suggestion that we should look at all competing products before committing. There's obviously something very special and feminine and instagrammy going on here.

$50/mo is not peanuts, but when you've dropped $3K on the hardware, there's suddenly a much stronger psychological barrier to cancelling the subscription, since it probably feels, psychologically, a lot like cutting bait on the $3K. It's really hard for me to imagine the scenario where we drop the sub. I'd guess as long as the hardware is operational, we're on the hook. Which is saying something, since this very much falls into the "COVID purchase" for us--she refuses to step foot in the gym and probably will not until POTUS has put the finishing touches on the vaccine.

4-6 week fulfillment time quoted on the order!
Title: Re: PTON - Peloton
Post by: Broeb22 on September 15, 2020, 06:10:10 AM
Haven't looked at this company, but just bought the new bike for my wife, who made it known this was to be the purchase and exhibited a psychotic belligerence to my suggestion that we should look at all competing products before committing. There's obviously something very special and feminine and instagrammy going on here.

$50/mo is not peanuts, but when you've dropped $3K on the hardware, there's suddenly a much stronger psychological barrier to cancelling the subscription, since it probably feels, psychologically, a lot like cutting bait on the $3K. It's really hard for me to imagine the scenario where we drop the sub. I'd guess as long as the hardware is operational, we're on the hook. Which is saying something, since this very much falls into the "COVID purchase" for us--she refuses to step foot in the gym and probably will not until POTUS has put the finishing touches on the vaccine.

4-6 week fulfillment time quoted on the order!

She'll get a lot of workouts in on that Peloton if she's waiting for POTUS to invent a vaccine himself, although he is smart, like so, so unbelievably smart. You've never seen a guy as smart as him.
Title: Re: PTON - Peloton
Post by: BG2008 on September 15, 2020, 06:43:38 AM
Haven't looked at this company, but just bought the new bike for my wife, who made it known this was to be the purchase and exhibited a psychotic belligerence to my suggestion that we should look at all competing products before committing. There's obviously something very special and feminine and instagrammy going on here.

$50/mo is not peanuts, but when you've dropped $3K on the hardware, there's suddenly a much stronger psychological barrier to cancelling the subscription, since it probably feels, psychologically, a lot like cutting bait on the $3K. It's really hard for me to imagine the scenario where we drop the sub. I'd guess as long as the hardware is operational, we're on the hook. Which is saying something, since this very much falls into the "COVID purchase" for us--she refuses to step foot in the gym and probably will not until POTUS has put the finishing touches on the vaccine.

4-6 week fulfillment time quoted on the order!

She'll get a lot of workouts in on that Peloton if she's waiting for POTUS to invent a vaccine himself, although he is smart, like so, so unbelievably smart. You've never seen a guy as smart as him.

Guys, I'm going to step in and say let's stop any political conversation and focus on the investing concept of Peloton.  Political conversations can quickly derail a thread.  Thanks.   

Also, let's keep in mind that our wives are the bosses of us.  It's important to know where we matter in the grand scheme of things. 
Title: Re: PTON - Peloton
Post by: fareastwarriors on September 15, 2020, 11:50:44 AM
Peloton thinks it can grow to 100 million subscribers. Here’s how

https://www.cnbc.com/2020/09/15/peloton-thinks-it-can-grow-to-100-million-subscribers-heres-how.html (https://www.cnbc.com/2020/09/15/peloton-thinks-it-can-grow-to-100-million-subscribers-heres-how.html)

Peloton CEO John Foley says the fitness company is aiming to have 100 million paying subscribers one day.

During its first-ever meeting as a public company with analysts and investors Tuesday, Foley listed 6 ways the company thinks it can meet that goal.

“There’s close to 200 million gym-goers in the world,” the CEO said. “That’s 200 million people paying hard money, month after month, to access what we believe to be inferior fitness equipment in an inferior location.”
Title: Re: PTON - Peloton
Post by: Gregmal on September 15, 2020, 11:54:23 AM
Go big or go home, I guess. Not promotional or nuffin. Just 50% of an optimistic TAM...
Title: Re: PTON - Peloton
Post by: Broeb22 on September 15, 2020, 01:37:54 PM
Go big or go home, I guess. Not promotional or nuffin. Just 50% of an optimistic TAM...

Hopefully he doesn't spend on S&M on that TAM estimate...but if he does I can just watch the cash flow into Google's and Facebook's ads businesses.

I guess thats one takeaway from Peloton and every other tech-y business like meal plans. Maybe the Google and Facebook ad machines are really very, very dependent on the crazy amounts of money being thrown at growth by huge-TAM-seeking VC-backed companies.

A few years ago, it was HelloFresh and their ilk, now its Peloton and Grubhub, maybe tomorrow it will be a VR/AR exercise bike that puts the face of your favorite celebrity on the trainer so you can ogle Taylor Swift or Madonna while you exercise. But I bet Peloton already thought of AR/VR and has bikes planned for 2025 to capitalize on that.
Title: Re: PTON - Peloton
Post by: patience_and_focus on September 15, 2020, 02:01:48 PM
Go big or go home, I guess. Not promotional or nuffin. Just 50% of an optimistic TAM...

Doesn't seems promotional to me. The guy genuinely believes in this. One can read his interview with Time magazine in May of this year (https://time.com/5839552/peloton-ceo-john-foley/  (https://time.com/5839552/peloton-ceo-john-foley/)). I think he is repeating this in his head and saying the exact same thing. Entrepreneurs are like that, they have to imagine and believe in something that usual folks cannot.

He also seems to be focused on "SAM". On a question about a cheaper bike -

"What’s the optimal price point, $1,000?
I don’t know. I wouldn’t think about it as an initial cash-outlay. I would think about it as a monthly payment. I think if you can get to 20 bucks a month per person, you’re starting to get below Planet Fitness-style, low-end gym chain affordability, and we think that that’s a pretty big opportunity for Peloton."
Title: Re: PTON - Peloton
Post by: Broeb22 on September 15, 2020, 02:04:06 PM
What's the metric(s) that tell you PTON is not gaining traction with subs?

I guess that's churn really, but bad churn numbers can be masked by fast growth for a while.

Maybe subscription revenue growth not growing as fast as Product Revenue?

Title: Re: PTON - Peloton
Post by: Gregmal on September 15, 2020, 02:26:16 PM
I mean 50% of the entire workout universe is a little bonkers. But hey, you never know.

What I do know is that many people go to the gym with friends. Many go to get out of the house/office. Many go for the atmosphere. This can not be replicated online/at home. Additionally, how much of the TAM is compromised by the household subscription? In other words, how much of that TAM makes up people with similar interest/an active household? If the husband, wife, a one of the teenagers is a hardcore fitness enthusiast(excuse my use I the traditional family, dont be offended..) thats great value for them, but poor value for PTON relative to the single career focused female living by herself. Or the new mother determined to get back into shape with the fat husband who never gets off his ass. Sure, they have levers, but just assuming they'll take huge share of the entire gym goer universe is a little bit of a stretch. This is also the flaw in the Netflix comparison. America is a fat and lazy country. Sit on you ass and chill with a huge video catalogue is definitely not the same market or value proposition as ride a bike and sweat hard for 30 minutes at 3x the monthly cost. The biggest thing with working out/gym memberships is that a very large number of those people really do not enjoy going, at all, which eventually leads to fatigue with the product/service.

Where I would focus, but hey its just me, is pushing hard for partnership subsidies for users much like AAPL has with the iPhone through carriers. Perhaps offer incentive for employers/health insurance providers to make this available to people in exchange for some sort of benefit. IE lower rates as it promotes a healthy lifestyle or whatever. Find someone to make $2k upfront affordable the same way AAPL found a way to make $1200 phones consumable every 24 months. Otherwise, the user base, at least in my eyes, is much smaller than people seem to believe right now, at a $25B valuation. Buying $100 leggings(LULU) or $7 lattes(SBUX) is much different than spending what for most folks is 1-2 months rent on a stationary bike...
Title: Re: PTON - Peloton
Post by: patience_and_focus on September 15, 2020, 05:36:31 PM
Probably belongs to APPL thread as well -

https://www.nytimes.com/live/2020/09/15/business/stock-market-today-coronavirus/apple-plans-a-digital-fitness-subscription-as-more-people-work-out-at-home (https://www.nytimes.com/live/2020/09/15/business/stock-market-today-coronavirus/apple-plans-a-digital-fitness-subscription-as-more-people-work-out-at-home)
Title: Re: PTON - Peloton
Post by: LounginMKL on September 15, 2020, 06:02:41 PM
This is also the flaw in the Netflix comparison. America is a fat and lazy country. Sit on you ass and chill with a huge video catalogue is definitely not the same market or value proposition as ride a bike and sweat hard for 30 minutes at 3x the monthly cost. The biggest thing with working out/gym memberships is that a very large number of those people really do not enjoy going, at all, which eventually leads to fatigue with the product/service...

...Buying $100 leggings(LULU) or $7 lattes(SBUX) is much different than spending what for most folks is 1-2 months rent on a stationary bike...

I thought about it some more and I agree with your above points. Pricing aside, it's much easier for users to continue their subscription/ repeat buy if it is an indulgence (NFLX/SBUX/CMG/LULU). Investing in PTON has to come with some opitmism that people will stick with their aspirational purchase, which historically has not been a good bet...

Love the product and the user base, but hard to invest at this valuation... But hey, isn't this your typical growth investing conundrum!?

Disclosure: No position in PTON
Title: Re: PTON - Peloton
Post by: LounginMKL on September 15, 2020, 06:06:43 PM
Probably belongs to APPL thread as well -

https://www.nytimes.com/live/2020/09/15/business/stock-market-today-coronavirus/apple-plans-a-digital-fitness-subscription-as-more-people-work-out-at-home (https://www.nytimes.com/live/2020/09/15/business/stock-market-today-coronavirus/apple-plans-a-digital-fitness-subscription-as-more-people-work-out-at-home)

This could either be taken as "hey, it's a proven market if AAPL is involved" or "f**k, AAPL is involved."
Title: Re: PTON - Peloton
Post by: misterkrusty on September 16, 2020, 08:44:58 AM
Quote
Doesn't seems promotional to me. The guy genuinely believes in this. One can read his interview with Time magazine in May of this year (https://time.com/5839552/peloton-ceo-john-foley/ ). I think he is repeating this in his head and saying the exact same thing. Entrepreneurs are like that, they have to imagine and believe in something that usual folks cannot.

@patience_and_focus    are you out of your mind?  Just because someone repeats something does not prove that they really believe it.

Yeah, Foley can "imagine and believe in something that usual folks cannot"   Dude, take it easy on the kool-aid.  Do you know how much acid is in that shit?
Title: Re: PTON - Peloton
Post by: Castanza on September 16, 2020, 10:17:48 AM
Quote
Doesn't seems promotional to me. The guy genuinely believes in this. One can read his interview with Time magazine in May of this year (https://time.com/5839552/peloton-ceo-john-foley/ ). I think he is repeating this in his head and saying the exact same thing. Entrepreneurs are like that, they have to imagine and believe in something that usual folks cannot.

@patience_and_focus    are you out of your mind?  Just because someone repeats something does not prove that they really believe it.

Yeah, Foley can "imagine and believe in something that usual folks cannot"   Dude, take it easy on the kool-aid.  Do you know how much acid is in that shit?

LOL Tech Crunch Disrupt is a great example of this. Every wide eyed coder who steps foot on stage either begins or ends with the tag line "our revolutionary tech will change the world".

The world is not short on overly optimistic entrepreneurs who deeply believe in their products.
Title: Re: PTON - Peloton
Post by: D33pV4lue on September 16, 2020, 01:05:45 PM
What's the metric(s) that tell you PTON is not gaining traction with subs?

I guess that's churn really, but bad churn numbers can be masked by fast growth for a while.

Maybe subscription revenue growth not growing as fast as Product Revenue?

TBH it is likely that you won't have normalized churn #'s for 2 years. This is just a guesstimate of mine but considering the high cost of the product and that fact that most are purchased using the 3rd party financing option (Affirm) and have 12, 24, and 39 month installments. I find it hard to believe that people will cancel their subscription while still paying for the bike. In addition >50% of the subs have been added in the last 6 months so the earliest possible subs to cancel would have had to buy in March using 12 month payment plan (I would also assume most people choose the 24 or 39). You also have to think that some people can pause their subscriptions for up to 3 months but aren't included in churn so there could be some lag. 
Title: Re: PTON - Peloton
Post by: fareastwarriors on September 21, 2020, 09:57:59 AM
datapoints from bogleheads.  8)

https://www.bogleheads.org/forum/viewtopic.php?f=11&t=320434&start=100 (https://www.bogleheads.org/forum/viewtopic.php?f=11&t=320434&start=100)
Title: Re: PTON - Peloton
Post by: Dalal.Holdings on October 01, 2020, 08:22:33 AM
datapoints from bogleheads.  8)

https://www.bogleheads.org/forum/viewtopic.php?f=11&t=320434&start=100 (https://www.bogleheads.org/forum/viewtopic.php?f=11&t=320434&start=100)

Lol. Did u read the VIC writeup doe?

Boglehead quote:
Quote
Happy with the purchase. It's been over a month now and we've never worked out so consistently. The right mix of classes, metrics, and simplicity make you wanting to go back for more.

Good luck and see you on the leader board
Title: Re: PTON - Peloton
Post by: Castanza on October 20, 2020, 07:28:35 AM
Some humor for your Tuesday

https://www.youtube.com/watch?v=5PHNGLio4Fg
Title: Re: PTON - Peloton
Post by: Dalal.Holdings on October 20, 2020, 07:42:37 PM
Never underestimate a brand that can turn its customers into cultists.
Title: Re: PTON - Peloton
Post by: BG2008 on October 21, 2020, 06:05:14 AM
Never underestimate a brand that can turn its customers into cultists.

This is a really good quote.  What other brands turn customers into cultists?  I can think of Tesla, Lulu, Harley Davidson (back in the days),
Title: Re: PTON - Peloton
Post by: Xaston on October 21, 2020, 06:07:29 AM
Apple
Title: Re: PTON - Peloton
Post by: BG2008 on October 21, 2020, 06:13:59 AM
Just had my 100 rides on the Peloton and just ordered my free century ride T-shirt. 
Title: Re: PTON - Peloton
Post by: BG2008 on October 21, 2020, 06:14:36 AM
Apple

Good one
Title: Re: PTON - Peloton
Post by: Castanza on October 21, 2020, 07:35:28 AM
Never underestimate a brand that can turn its customers into cultists.

It's easy to point to the "winners" which have cult followings and say this. If you took that advice in 1999 you would likely be bankrupt. There is no shortage of cult followings for a whole host of companies. I'm not saying PTON will fail, but it's not a good way to invest imo (and I don't think you're saying that).
Title: Re: PTON - Peloton
Post by: BG2008 on October 21, 2020, 08:27:34 AM
Never underestimate a brand that can turn its customers into cultists.

It's easy to point to the "winners" which have cult followings and say this. If you took that advice in 1999 you would likely be bankrupt. There is no shortage of cult followings for a whole host of companies. I'm not saying PTON will fail, but it's not a good way to invest imo (and I don't think you're saying that).

This is true.  Harley still has loyal cultist.  But they have largely aged out and paying $30,000 for a hog does not really resonate with millennial with debt.  While the product is cultist, it doesn't have a decade long run way like a Peloton. 
Title: Re: PTON - Peloton
Post by: Broeb22 on October 21, 2020, 03:41:04 PM
Never underestimate a brand that can turn its customers into cultists.

This is a really good quote.  What other brands turn customers into cultists?  I can think of Tesla, Lulu, Harley Davidson (back in the days),

Jury is out on Yeezy’s and Kanye but he’s trying hard on the cult side of things.
Title: Re: PTON - Peloton
Post by: Dalal.Holdings on November 06, 2020, 07:09:26 AM
Crushing it. Can’t keep up with demand.
Title: Re: PTON - Peloton
Post by: Dalal.Holdings on November 25, 2020, 05:31:40 PM
https://www.fool.com/investing/2020/11/25/pelotons-delivery-pain-could-be-nautilus-sales-gai/

Quote
Delivery issues that have been building up throughout the pandemic for Peloton Interactive (NASDAQ:PTON) could begin spilling over, hurting its own sales while helping those of rivals like Nautilus (NYSE:NLS).

https://www.wsj.com/articles/some-peloton-buyers-are-sick-of-waiting-11606213803

Quote
Peloton’s smaller rivals such as Nautilus Inc. NLS 2.97% and NordicTrack maker Icon Health & Fitness Inc. may benefit from the market leader’s supply-chain woes. Nautilus, which also makes Bowflex workout systems of 1980s infomercial fame, offers lower-priced bikes and advertises a connected system compatible with Peloton’s online classes.

I'm sure folks will settle for the Zune when they can't have the iPod...

Bowflex! Lol...
Title: Re: PTON - Peloton
Post by: Dalal.Holdings on December 14, 2020, 06:58:02 AM
Added to the Nasdaq 100

I’m still waiting for the Peloton bikes to become drying racks because I was told “all exercise trends are short lived fads” and “this is just like GoPro”.
Title: Re: PTON - Peloton
Post by: Gregmal on December 14, 2020, 07:21:31 AM
Indeed. Seems like a solid fundamental development. This company has definitely proven itself to have long term staying power over the past....month or two.
Title: Re: PTON - Peloton
Post by: Dalal.Holdings on December 14, 2020, 07:26:21 AM
Yeah, the bikes have only been on sale “for a month or two”.

Like I said, still waiting for the drying racks. Fads tend to burn out “after a month or two” after all.

Title: Re: PTON - Peloton
Post by: Castanza on December 14, 2020, 07:32:36 AM
Yeah, the bikes have only been on sale “for a month or two”.

Like I said, still waiting for the drying racks. Fads tend to burn out “after a month or two” after all.

Didn't the Bowflex fad last for a few years before fizzling out?
Title: Re: PTON - Peloton
Post by: Gregmal on December 14, 2020, 07:36:45 AM
If your thesis was that it wasnt a pandemic enhanced fad, well, there certainly hasn't been any sort of long term fundamental development that has either proven or disproven that at this point. Especially given that we are just beginning to enter the final phases of that event. The entire pandemic has spanned less than 3 quarters. But I do see how something fundamental like an index inclusion can change that...

The pandemic enhanced order boost, as mentioned earlier in the thread, probably carries on for another 2 quarters worth of results due to order/delivery/fulfillment + holiday season lag.

Got one of these things coming tomorrow for the wife. 5 week delivery window isn't all that bad all things considered. Execution has been solid so far.
Title: Re: PTON - Peloton
Post by: Dalal.Holdings on December 14, 2020, 07:38:21 AM
Yep, this is just like Bowflex (founded in 1980s) or Beanie Babies.

Load up on them shorts !

And my prediction is this company will thrive well beyond the pandemic...the stock may or may not have gotten ahead of itself for the time being, but the firm/brand has a bright future.
Title: Re: PTON - Peloton
Post by: Gregmal on December 14, 2020, 07:42:43 AM
Yep, this is just like Bowflex (founded in 1980s) or Beanie Babies.

Load up on them shorts !

And my prediction is this company will thrive well beyond the pandemic...the stock may or may not have gotten ahead of itself for the time being, but the firm/brand has a bright future.

In terms of the investment, thats really all that matters. I haven't encountered anyone yet who is saying anything other than "this is a pretty special/unique brand"..
Title: Re: PTON - Peloton
Post by: Dalal.Holdings on December 14, 2020, 07:51:36 AM
Yep, this is just like Bowflex (founded in 1980s) or Beanie Babies.

Load up on them shorts !

And my prediction is this company will thrive well beyond the pandemic...the stock may or may not have gotten ahead of itself for the time being, but the firm/brand has a bright future.

In terms of the investment, thats really all that matters. I haven't encountered anyone yet who is saying anything other than "this is a pretty special/unique brand"..

I’m not gonna try to trade or overthink this too much. I sold TSLA after a 4x gain when I could have made much more. Obviously TSLA is irrationally priced for more than perfection, but generally Warren is right: never selling is the best option when you like the underlying business or a great firm/brand with staying power (which is my view of PTON).

If things change and the bikes start becoming drying racks, then I’m gone. If it hits totally stratospheric, nosebleed valuations, I’d think harder about it. But not there yet as far as I’m concerned.
Title: Re: PTON - Peloton
Post by: Gregmal on December 14, 2020, 07:53:30 AM
Fair enough. Best of luck.
Title: Re: PTON - Peloton
Post by: Broeb22 on December 14, 2020, 01:37:49 PM
If I were a bear, I'd look at this churn chart (attached) from their investor day and think Gee, did the pandemic save PTON's churn metrics? It certainly seems like churn was elevated for about 4 quarters prior to COVID-19 happening.

If I take their last 4 years of results, they have sold $2.7 billion of products, i.e. treadmills, bikes, etc. Divided by $2,000, they have sold a product to approx. 1.4 million households, or 1.1% of total households, and 1.8% of households >$50k income. This fiscal year if their product revenue doubles to $3 billion, that's another 1.5 million households, and another 1% of the population (2% of target market). You can make your own extrapolations as to where this goes in a fitness market that is and likely will always be competitive.

What is more important is PTON is currently at about a $550 million connect subscription revenue run-rate, which let's say doubles to $1 billion next year.

How much of the value of this business is tied to the ongoing sales of products vs. the subscription business? Will the subscription business be able to support the cost structure of the total company at some point when product growth declines? Will SG&A costs ramp down when product growth does and will PTON be able to afford spending on sales and marketing at the same levels in the future when the product business growth decelerates (or even declines)?
Title: Re: PTON - Peloton
Post by: chrispy on December 15, 2020, 06:09:09 AM
Broeb - interesting questions. It should be noted that when the bikes are financed at 0%, the digital subscription at the top tier price is mandatory until the product is paid off. Therefore, churn will be 0 (I think) for every financed bike for a couple of years
Title: Re: PTON - Peloton
Post by: Broeb22 on December 15, 2020, 07:37:47 AM
Broeb - interesting questions. It should be noted that when the bikes are financed at 0%, the digital subscription at the top tier price is mandatory until the product is paid off. Therefore, churn will be 0 (I think) for every financed bike for a couple of years

That's interesting. If that is the case, then the true churn (i.e. people who have a choice to subscribe or not) would be a lot higher than these headline metrics would suggest, no? Is there a way to know how many of their current subscribers also are currently "locked in" to their subscription?
Title: Re: PTON - Peloton
Post by: A Dhandho Investor on December 15, 2020, 08:23:10 AM
Broeb - interesting questions. It should be noted that when the bikes are financed at 0%, the digital subscription at the top tier price is mandatory until the product is paid off. Therefore, churn will be 0 (I think) for every financed bike for a couple of years

That's interesting. If that is the case, then the true churn (i.e. people who have a choice to subscribe or not) would be a lot higher than these headline metrics would suggest, no? Is there a way to know how many of their current subscribers also are currently "locked in" to their subscription?

Guys, why are you nitpicking over details? Dalal has shown that it you can have multibaggers in your portfolio without doing a lot of in depth fundamental analysis. In the current market good old level 1 thinking works best, so why waste time trying to get the details right? 
Title: Re: PTON - Peloton
Post by: Broeb22 on December 15, 2020, 09:46:39 AM

Guys, why are you nitpicking over details? Dalal has shown that it you can have multibaggers in your portfolio without doing a lot of in depth fundamental analysis. In the current market good old level 1 thinking works best, so why waste time trying to get the details right?

You just wait. This $32 billion EV company is going to be huge. They only need $5 billion of software revenues to trade at a 20x P/ Software Sales at an $100B EV. Or about 5x the size of where they might be next year. But because PTON ALWAYS doubles revenues, they will get there in less than 3 years. So basically this is a classic Pabrai double (or triple) in 3 years.

Think about the arbitrage they can do when they can buy bikes back at $500 then sell them refurbished at $1200. There will be a huge, profitable marketplace for Peloton used equipment, so PTON doesn't get just one bite at the apple when they sell a bike. They sell, buy it back, re-sell it, buy it back, and re-sell it again. So that's like 3 bites at the apple for the same piece of equipment. Boom. Bear case dismantled.
Title: Re: PTON - Peloton
Post by: D33pV4lue on December 15, 2020, 12:51:46 PM
If I were a bear, I'd look at this churn chart (attached) from their investor day and think Gee, did the pandemic save PTON's churn metrics? It certainly seems like churn was elevated for about 4 quarters prior to COVID-19 happening.

If I take their last 4 years of results, they have sold $2.7 billion of products, i.e. treadmills, bikes, etc. Divided by $2,000, they have sold a product to approx. 1.4 million households, or 1.1% of total households, and 1.8% of households >$50k income. This fiscal year if their product revenue doubles to $3 billion, that's another 1.5 million households, and another 1% of the population (2% of target market). You can make your own extrapolations as to where this goes in a fitness market that is and likely will always be competitive.

What is more important is PTON is currently at about a $550 million connect subscription revenue run-rate, which let's say doubles to $1 billion next year.

How much of the value of this business is tied to the ongoing sales of products vs. the subscription business? Will the subscription business be able to support the cost structure of the total company at some point when product growth declines? Will SG&A costs ramp down when product growth does and will PTON be able to afford spending on sales and marketing at the same levels in the future when the product business growth decelerates (or even declines)?

Let me start this off by saying I have absolutely no freaking idea what the TAM for PTON is. That being said this is what I came up with.

Using the US as a proxy there are ~128 million households, I was able to find a 2017 stat of total gym members ships of 61 million representing 47% of households. If 30% of US households make over $100,000 and 47% of those have gym memberships that would put the US TAM at 18 million and their current market share at 5%. That does not include penetration into Canada, UK, and Europe.

I have no skin in the game here but just looking at the potential US TAM I think its safe to say that the runway is pretty large. What's sub 1% quarterly turn on 1 million subscriptions when you could potentially add millions of subscribers?  If you are a bear you will also want to think about how the Pandemic will change people's behavior. I'm not smart enough to figure that out.

I think its best to not stand in front of a freight train.
Title: Re: PTON - Peloton
Post by: Gregmal on December 15, 2020, 01:01:46 PM
I agree for sure there is a huge TAM and many options to expand the brand. I have a few puts(instead of outright short) for this reason. Shorting something with that type of dynamic is much more dangerous than some one dimensional, commoditized crap like BYND or ZM.

Where I think there is an unseen opportunity is using the frailty of the current physical gym market to potentially expand the brand via licensing/franchise partnerships and/or increasing the network effect. I can see quite a few gyms, especially smaller scale ones utilizing a "Peloton Partner" model to drive traffic and enthusiasm. In fact, you've already seen it with many of the Ironman, Crossfit, F45 type stuff popping up.

My interest as a short play is really just a bubble burst/covid reverse hedge. If the music stops this is getting crushed. But there are definitely long term avenues which can be pursued beyond simply selling Nordic Tracks with iPads on them.
Title: Re: PTON - Peloton
Post by: influx on December 15, 2020, 02:58:57 PM
I agree for sure there is a huge TAM and many options to expand the brand. I have a few puts(instead of outright short) for this reason. Shorting something with that type of dynamic is much more dangerous than some one dimensional, commoditized crap like BYND or ZM.

What's the duration of the puts?
Title: Re: PTON - Peloton
Post by: Castanza on December 15, 2020, 03:15:07 PM
If I were a bear, I'd look at this churn chart (attached) from their investor day and think Gee, did the pandemic save PTON's churn metrics? It certainly seems like churn was elevated for about 4 quarters prior to COVID-19 happening.

If I take their last 4 years of results, they have sold $2.7 billion of products, i.e. treadmills, bikes, etc. Divided by $2,000, they have sold a product to approx. 1.4 million households, or 1.1% of total households, and 1.8% of households >$50k income. This fiscal year if their product revenue doubles to $3 billion, that's another 1.5 million households, and another 1% of the population (2% of target market). You can make your own extrapolations as to where this goes in a fitness market that is and likely will always be competitive.

What is more important is PTON is currently at about a $550 million connect subscription revenue run-rate, which let's say doubles to $1 billion next year.

How much of the value of this business is tied to the ongoing sales of products vs. the subscription business? Will the subscription business be able to support the cost structure of the total company at some point when product growth declines? Will SG&A costs ramp down when product growth does and will PTON be able to afford spending on sales and marketing at the same levels in the future when the product business growth decelerates (or even declines)?

Let me start this off by saying I have absolutely no freaking idea what the TAM for PTON is. That being said this is what I came up with.

Using the US as a proxy there are ~128 million households, I was able to find a 2017 stat of total gym members ships of 61 million representing 47% of households. If 30% of US households make over $100,000 and 47% of those have gym memberships that would put the US TAM at 18 million and their current market share at 5%. That does not include penetration into Canada, UK, and Europe.

I have no skin in the game here but just looking at the potential US TAM I think its safe to say that the runway is pretty large. What's sub 1% quarterly turn on 1 million subscriptions when you could potentially add millions of subscribers?  If you are a bear you will also want to think about how the Pandemic will change people's behavior. I'm not smart enough to figure that out.

I think its best to not stand in front of a freight train.

The issue with this is it ascribes no value to how difficult it is to capture market share. It's like the people who go on Shark Tank and say "This industry is 200bazillion dollars. All we need to do is capture .5% and we are bazillionairs!"

I'm not saying you're wrong. Just that investing from this frame of view is risky as it's pure speculation.

Title: Re: PTON - Peloton
Post by: Gregmal on December 15, 2020, 03:17:07 PM
I agree for sure there is a huge TAM and many options to expand the brand. I have a few puts(instead of outright short) for this reason. Shorting something with that type of dynamic is much more dangerous than some one dimensional, commoditized crap like BYND or ZM.

What's the duration of the puts?

March and a few in July. Ive still got some intention of building into more of the Julys. My general thesis is that the market is largely complacent right now for a variety of reasons and between a good number of events taking place over the next couple months and perhaps the covid boost here beginning to wane that a correction/maybe full blown bubble pop type of event is feasible with valuations on some of these things where they are. If something like this survives the next 6 months of "return to normal" then I wouldn't really want to be shorting it.
Title: Re: PTON - Peloton
Post by: D33pV4lue on December 16, 2020, 06:45:52 AM
If I were a bear, I'd look at this churn chart (attached) from their investor day and think Gee, did the pandemic save PTON's churn metrics? It certainly seems like churn was elevated for about 4 quarters prior to COVID-19 happening.

If I take their last 4 years of results, they have sold $2.7 billion of products, i.e. treadmills, bikes, etc. Divided by $2,000, they have sold a product to approx. 1.4 million households, or 1.1% of total households, and 1.8% of households >$50k income. This fiscal year if their product revenue doubles to $3 billion, that's another 1.5 million households, and another 1% of the population (2% of target market). You can make your own extrapolations as to where this goes in a fitness market that is and likely will always be competitive.

What is more important is PTON is currently at about a $550 million connect subscription revenue run-rate, which let's say doubles to $1 billion next year.

How much of the value of this business is tied to the ongoing sales of products vs. the subscription business? Will the subscription business be able to support the cost structure of the total company at some point when product growth declines? Will SG&A costs ramp down when product growth does and will PTON be able to afford spending on sales and marketing at the same levels in the future when the product business growth decelerates (or even declines)?

Let me start this off by saying I have absolutely no freaking idea what the TAM for PTON is. That being said this is what I came up with.

Using the US as a proxy there are ~128 million households, I was able to find a 2017 stat of total gym members ships of 61 million representing 47% of households. If 30% of US households make over $100,000 and 47% of those have gym memberships that would put the US TAM at 18 million and their current market share at 5%. That does not include penetration into Canada, UK, and Europe.

I have no skin in the game here but just looking at the potential US TAM I think its safe to say that the runway is pretty large. What's sub 1% quarterly turn on 1 million subscriptions when you could potentially add millions of subscribers?  If you are a bear you will also want to think about how the Pandemic will change people's behavior. I'm not smart enough to figure that out.

I think its best to not stand in front of a freight train.

The issue with this is it ascribes no value to how difficult it is to capture market share. It's like the people who go on Shark Tank and say "This industry is 200bazillion dollars. All we need to do is capture .5% and we are bazillionairs!"

I'm not saying you're wrong. Just that investing from this frame of view is risky as it's pure speculation.

Please tell me more about my frame of view.... Like I said I don't own this and I am not short it. I am value investor PTON would never be in my portfolio for the reasons you point out, I am not a "spread sheeter". I had to look at it as a short I passed along the data I came up with in reference to the bear case.
Title: Re: PTON - Peloton
Post by: Castanza on December 16, 2020, 07:17:40 AM
If I were a bear, I'd look at this churn chart (attached) from their investor day and think Gee, did the pandemic save PTON's churn metrics? It certainly seems like churn was elevated for about 4 quarters prior to COVID-19 happening.

If I take their last 4 years of results, they have sold $2.7 billion of products, i.e. treadmills, bikes, etc. Divided by $2,000, they have sold a product to approx. 1.4 million households, or 1.1% of total households, and 1.8% of households >$50k income. This fiscal year if their product revenue doubles to $3 billion, that's another 1.5 million households, and another 1% of the population (2% of target market). You can make your own extrapolations as to where this goes in a fitness market that is and likely will always be competitive.

What is more important is PTON is currently at about a $550 million connect subscription revenue run-rate, which let's say doubles to $1 billion next year.

How much of the value of this business is tied to the ongoing sales of products vs. the subscription business? Will the subscription business be able to support the cost structure of the total company at some point when product growth declines? Will SG&A costs ramp down when product growth does and will PTON be able to afford spending on sales and marketing at the same levels in the future when the product business growth decelerates (or even declines)?

Let me start this off by saying I have absolutely no freaking idea what the TAM for PTON is. That being said this is what I came up with.

Using the US as a proxy there are ~128 million households, I was able to find a 2017 stat of total gym members ships of 61 million representing 47% of households. If 30% of US households make over $100,000 and 47% of those have gym memberships that would put the US TAM at 18 million and their current market share at 5%. That does not include penetration into Canada, UK, and Europe.

I have no skin in the game here but just looking at the potential US TAM I think its safe to say that the runway is pretty large. What's sub 1% quarterly turn on 1 million subscriptions when you could potentially add millions of subscribers?  If you are a bear you will also want to think about how the Pandemic will change people's behavior. I'm not smart enough to figure that out.

I think its best to not stand in front of a freight train.

The issue with this is it ascribes no value to how difficult it is to capture market share. It's like the people who go on Shark Tank and say "This industry is 200bazillion dollars. All we need to do is capture .5% and we are bazillionairs!"

I'm not saying you're wrong. Just that investing from this frame of view is risky as it's pure speculation.

Please tell me more about my frame of view.... Like I said I don't own this and I am not short it. I am value investor PTON would never be in my portfolio for the reasons you point out, I am not a "spread sheeter". I had to look at it as a short I passed along the data I came up with in reference to the bear case.

I was agreeing with you, while also giving my personal pref that I don't like investment thesis with a foundation of "if we capture this much market share then...."

To me it's risky and judging by your first comment I think you agree. I wasn't criticizing your numbers  :D

Title: Re: PTON - Peloton
Post by: fareastwarriors on December 21, 2020, 01:56:37 PM
Peloton to acquire fitness equipment maker Precor for $420 million

https://www.cnbc.com/2020/12/21/peloton-to-acquire-fitness-equipment-maker-precor-for-420-million.html
Title: Re: PTON - Peloton
Post by: Jurgis on December 21, 2020, 02:44:19 PM
Peloton to acquire fitness equipment maker Precor for $420 million

https://www.cnbc.com/2020/12/21/peloton-to-acquire-fitness-equipment-maker-precor-for-420-million.html

AOL meet TimeWarner.  8)
Title: Re: PTON - Peloton
Post by: Gregmal on December 21, 2020, 03:19:24 PM
LOL. Its only natural a $420M acquisition creates $4B in value.

Jokes aside its actually a fairly reasonable and sneaky good acquisition.

"Under the Peloton umbrella, Precor plans to make the award-winning Peloton experience accessible to more people through its long-standing relationships with hotels, multifamily residences, and college and corporate campuses.

This is pretty much what I was looking at for their upside catalyst a few posts ago. The at home market is small potatoes. Getting into real gyms is where the brand can really take off.
Title: Re: PTON - Peloton
Post by: Broeb22 on December 21, 2020, 04:45:42 PM
Does it say anything at all about the absurdity of their valuation that one of the largest targets in their industry is 1/100 of their value?

Precor is a household name and they sold for $400 million? But Peloton getting into the same business somehow makes it worth more?

Some of this stuff just doesn’t make sense.
Title: Re: PTON - Peloton
Post by: Gregmal on December 21, 2020, 05:06:57 PM
Yea but in a Robinhood market nice headlines create shareholder value. It'll continue until it doesnt. There's quite a bit of evidence its nearing its crescendo. If you are smart enough to buy real companies during your bubble, or at least raise some capital, you'll at least have a better shot of making it through the unwind. I didnt catch the transaction structure, but it would be stupid if they weren't funding this with stock. Minimal dilution and effectively free money.
Title: Re: PTON - Peloton
Post by: jschembs on December 21, 2020, 05:17:44 PM
Yea but in a Robinhood market nice headlines create shareholder value. It'll continue until it doesnt. There's quite a bit of evidence its nearing its crescendo. If you are smart enough to buy real companies during your bubble, or at least raise some capital, you'll at least have a better shot of making it through the unwind. I didnt catch the transaction structure, but it would be stupid if they weren't funding this with stock. Minimal dilution and effectively free money.

100% cash purchase
Title: Re: PTON - Peloton
Post by: Broeb22 on December 28, 2020, 06:57:28 AM
https://yetanothervalueblog.com/2020/12/peloton-fitbit-2-0-or-netflix-2-0-pton.html (https://yetanothervalueblog.com/2020/12/peloton-fitbit-2-0-or-netflix-2-0-pton.html)

Andrew getting in on the fun. I respect his work but I continue to believe there is nothing special about this company and that the pandemic is simply masking a business that is just like many other fitness businesses.
 

Title: Re: PTON - Peloton
Post by: Broeb22 on December 28, 2020, 08:33:52 AM
Affirm Holdings happens to be Peloton's lending partner on its 0% programs.

There is some good detail in their S-1 that points to some of the economics of the agreements and the likely percentage of PTON's sales being sold through 0% financing. For reference, total Affirm revenue in the year ended June 30, 2020 was $509.5 million, so 28% of $509.5 = $142.7 million of revenue from PTON. Using the data below, if PTON 0% loans come with a 10.0% fee paid by PTON, then the $143 million in revenue translates to $1.43 billion in Peloton product sales, which is almost 100% of PTON sales. 100% is way too high, but if you increase the 10% fee to 15% paid to Affirm then 0% financing revenue falls to $953 million, or 65% of revenue. That seems more reasonable, if perhaps a bit low. So 2/3 of Peloton sales occurred through the third-party financing program, where subscribers are locked in to a subscription for 39 months. Since ~90% of all the revenue PTON has ever generated has occurred the last 3 years, we have not really seen true churn for a significant majority of their subs. More importantly, I think you may be able to apply the churn metrics to their non-captive customers who are actually deciding every month whether to keep their connected fitness subscription. PTON states average churn 2017-2020 of 0.64%. If you say that 2/3 of the subs are captive, then 1/3 of the customers are actually choosing to churn or not. In other words, I think the underlying churn on connected fitness is closer to ~1.9%, and if the % of subs purchasing through 0% financing is closer to 75% then the numbers are quadrupled, not tripled ( to ~2.5%). Does any part of this seem incorrect to others?



Page 25
"Our top merchant partner, Peloton, represented approximately 28% of our total revenue for the fiscal year ended June 30, 2020 and 30% of our total revenue for the three months ended September 30, 2020. Our top ten merchants in the aggregate represented approximately 35% of our total revenue for the fiscal year ended June 30, 2020 and approximately 37% of our total revenue for the three months ended September 30, 2020."

page 101
"Merchant network revenue increased by $124.4 million, or 94%, compared to the fiscal year ended June 30, 2019. For the fiscal year ended June 30, 2020, merchant network revenue as a percentage of GMV increased to 5.5% versus 5.1% in the prior year period.

The increases in current period merchant network revenue were primarily driven by growth in GMV coupled with higher proportions of 0% APR loans and longer duration loans, and was partially offset by lower AOVs. Merchant network revenue growth is correlated with both GMV growth and the mix of loans on our platform as different loan characteristics are positively or negatively correlated with merchant fee revenue as a percentage of GMV. In particular, merchant network revenue as a percentage of GMV typically increases with the term length and order value of our loans, and typically decreases in higher APR loans. Specifically, 0% APR loans typically carry higher merchant fees as a percentage of GMV. GMV for the fiscal year ended June 30, 2020 increased 77% compared to the prior fiscal year. For the fiscal year ended June 30, 2020, the proportion of 0% APR loans increased to 43% of our total GMV, compared to 33% for the prior year period. For the fiscal year ended June 30, 2020, loans with a term length greater than 12 months accounted for 34% of GMV, compared with 27% for the prior year period. These increases were partially offset by a reduction in AOV to $609 in the year ended June 30, 2020, a decrease of 5% from $639 in the prior year period."

Title: Re: PTON - Peloton
Post by: Dalal.Holdings on January 13, 2021, 08:29:21 AM
Well, it’s been a helluva ride. I’m out. I’m open to getting back in later if the price is right.
Title: Re: PTON - Peloton
Post by: Dalal.Holdings on February 12, 2021, 04:42:31 PM
This is what I call a good deal:

https://www.prnewswire.com/news-releases/peloton-interactive-inc-announces-closing-of-1-0-billion-of-0-convertible-senior-notes-due-2026--including-full-exercise-of-initial-purchasers-125-0-million-option-to-purchase-additional-notes-301227245.html

$1B of 0% convertible notes ...

Quote
The notes are convertible at an initial conversion rate...equivalent to an initial conversion price of approximately $239.23 per share of Class A common stock, which represents a conversion premium of approximately 65% to the last reported sale price of $144.99 per share
Title: Re: PTON - Peloton
Post by: Cigarbutt on February 13, 2021, 10:19:12 AM
This is what I call a good deal:
https://www.prnewswire.com/news-releases/peloton-interactive-inc-announces-closing-of-1-0-billion-of-0-convertible-senior-notes-due-2026--including-full-exercise-of-initial-purchasers-125-0-million-option-to-purchase-additional-notes-301227245.html
$1B of 0% convertible notes ...
Quote
The notes are convertible at an initial conversion rate...equivalent to an initial conversion price of approximately $239.23 per share of Class A common stock, which represents a conversion premium of approximately 65% to the last reported sale price of $144.99 per share
Thanks! That was interesting.
Disclosure: i don't know enough about this to short and accept that some can make money on it but it seems their model is flawed (and possibly a fad).
Barron's had a related piece on this aspect.

A potential conclusion is that the present environment allows for a full exploitation of momentum and related volatility (statistical at the expense of fundamental?). If you're the CFO for the issuer and get a feel for the market and you get those terms, how can you refuse?
So a 5-yr zero-coupon bond sold at (essentially) par, with a large (potentially huge) conversion premium, and some issuer protection. For a few minutes, i looked at the safety of the bond 'investment' and at the potential opportunity of the conversion value and came away with a strengthened conclusion that investing (like training) should be the result of independent thought.
Obviously the wisdom of crowds could apply.
(https://images.barrons.com/im-284840?width=1260&size=1.5)
The topic triggered an insufficient motivation to go out and move (it's -14 °C outside).
Title: Re: PTON - Peloton
Post by: Dalal.Holdings on February 13, 2021, 07:31:12 PM
"It seems their model is flawed. And a fad".

Thank you for your unique insights...

I don't see too many flaws in a business where customers are willing to hand over thousands of dollars for some equipment and buy a (relatively) high priced subscription for their services....

Anyone who thinks this is a fad probably felt the same way about NFLX or the iPod back in the day. Back to your cigarbutts.

The bond issue was a good deal...for PTON, not the bondholders.

Quote
One reason for the high demand for the Peloton converts was that the implied volatility for the stock embedded in the securities was around 45%, one investor tells Barron’s. That is below the 60% implied volatility in Peloton equity options. This makes it appealing for arbitrageurs to buy the converts despite the lofty premium.

They effectively took advantage of IV to issue some low cost debt...




Title: Re: PTON - Peloton
Post by: Cigarbutt on February 14, 2021, 04:48:07 AM
Thank you for your unique insights...
I don't see too many flaws in a business where customers are willing to hand over thousands of dollars for some equipment and buy a (relatively) high priced subscription for their services....
Anyone who thinks this is a fad probably felt the same way about NFLX or the iPod back in the day. Back to your cigarbutts.
The bond issue was a good deal...for PTON, not the bondholders...
::) You are correct. It was inappropriate to comment about a specific name (which is out of my league, like most other listed stocks), and without adequate due diligence, especially about the 'model'.
Also, consistently and reliably being personally involved on a trainer in my basement during the winter months does not translate into meaningful insights for this specific situation. Got it.
-----
The post was really meant to comment more on the funding environment. In the last few months, in some sectors i follow a bit more, there have been many issues which seemed (still seem) mind boggling: The Hertz attempt to issue common equity after filing, companies (like LVMH) issuing negative yielding debt and junk bonds trading below 4% last week and i thought (i was possibly wrong there too) that the PTON convertible issue was part of the same environment. i've clearly missed some of the recent enlightenment.
A nice thing about endurance is that one doesn't need to have special skills or to be bright and this can be observed sometimes in real pelotons, especially in multi-day races.
Title: Re: PTON - Peloton
Post by: Broeb22 on February 14, 2021, 06:22:38 AM
Thank you for your unique insights...
I don't see too many flaws in a business where customers are willing to hand over thousands of dollars for some equipment and buy a (relatively) high priced subscription for their services....
Anyone who thinks this is a fad probably felt the same way about NFLX or the iPod back in the day. Back to your cigarbutts.
The bond issue was a good deal...for PTON, not the bondholders...
::) You are correct. It was inappropriate to comment about a specific name (which is out of my league, like most other listed stocks), and without adequate due diligence, especially about the 'model'.
Also, consistently and reliably being personally involved on a trainer in my basement during the winter months does not translate into meaningful insights for this specific situation. Got it.
-----
The post was really meant to comment more on the funding environment. In the last few months, in some sectors i follow a bit more, there have been many issues which seemed (still seem) mind boggling: The Hertz attempt to issue common equity after filing, companies (like LVMH) issuing negative yielding debt and junk bonds trading below 4% last week and i thought (i was possibly wrong there too) that the PTON convertible issue was part of the same environment. i've clearly missed some of the recent enlightenment.
A nice thing about endurance is that one doesn't need to have special skills or to be bright and this can be observed sometimes in real pelotons, especially in multi-day races.

+1
Title: Re: PTON - Peloton
Post by: Dalal.Holdings on February 14, 2021, 10:08:59 AM
I invite all "traditional value investors" on here who enjoy mocking this company to provide an alternative valuation for PTON the enterprise.

Let's see what your "fundamental analysis" cooks up. Because remember, folks were even mocking this thing when it was worth just $8 Billion not too long ago.

Clearly there is a number greater than zero. And if you want to argue it's worth zero, would love hearing the justification for shits and giggles.


Title: Re: PTON - Peloton
Post by: Broeb22 on February 14, 2021, 03:58:04 PM
I invite all "traditional value investors" on here who enjoy mocking this company to provide an alternative valuation for PTON the enterprise.

Let's see what your "fundamental analysis" cooks up. Because remember, folks were even mocking this thing when it was worth just $8 Billion not too long ago.

Clearly there is a number greater than zero. And if you want to argue it's worth zero, would love hearing the justification for shits and giggles.

Since I'm not a "traditional value investor" I guess you're not asking for my opinion.

So I'll just sit back and watch as this company that is definitely not a fad and is maybe trading at 60x Fiscal 2022 earnings goes to the moon. If they do, congrats to the folks that "got it". I don't see it, and I don't have to "get" everything to be a successful investor. But it is pretty amusing seeing some folks like you defend stocks you just sold so vigorously. Good trade, but don't fool yourself into believing you actually were investing.
Title: Re: PTON - Peloton
Post by: Dalal.Holdings on February 14, 2021, 07:40:34 PM
I invite all "traditional value investors" on here who enjoy mocking this company to provide an alternative valuation for PTON the enterprise.

Let's see what your "fundamental analysis" cooks up. Because remember, folks were even mocking this thing when it was worth just $8 Billion not too long ago.

Clearly there is a number greater than zero. And if you want to argue it's worth zero, would love hearing the justification for shits and giggles.

Since I'm not a "traditional value investor" I guess you're not asking for my opinion.

So I'll just sit back and watch as this company that is definitely not a fad and is maybe trading at 60x Fiscal 2022 earnings goes to the moon. If they do, congrats to the folks that "got it". I don't see it, and I don't have to "get" everything to be a successful investor. But it is pretty amusing seeing some folks like you defend stocks you just sold so vigorously. Good trade, but don't fool yourself into believing you actually were investing.

What's amusing is seeing folks who admit they don't "get it" come around and repeatedly trash something they "don't get". Kind of strange, no?

When I don't know enough about something, I don't say anything.

So...60x 2022 earnings. I guess you liked it when it was < 12x 2022 earnings less than a year ago right? BTW they have $1.5B net cash on balance sheet, positive FCF TTM...
Title: Re: PTON - Peloton
Post by: valueinvestor on February 14, 2021, 08:12:45 PM
Not bashing it. But was there any post on this that looked like an investment analysis? Off balance sheet - the brand and community is a valuable asset. Not sure how that translates into a great business. It maybe similar to gymshark - where it’s a clothing store worth $1B in 10 years.

Think there’s easier ways to make money. Congrats to the longs, hope the investment continues to pay dividends.
Title: Re: PTON - Peloton
Post by: Cigarbutt on February 14, 2021, 08:24:00 PM
But was there any post on this that looked like an investment analysis? Off balance sheet - the brand and community is a valuable asset...
Mr. Dalal.Holdings,
Can i ask a specific question about the convertible bond?
If yes, from what i understand (your posts) the bond issue may be overpriced but is still good value (over time)?
So, if one is into this because of an enduring moat, this bond should behave, over time, as a call option on the equity. How to value the convertible bond and how much is it worth now (range)?
PTON’s share price has gone up a lot and has been volatile so the models to value the option value are quite unreliable. A way (more fundamental way?) to value the bond may involve a few scenarios of equity value in 5 years, to calculate a few values from these scenarios for the bond near expiration and to discount a weighted number to now. How much would this bond be worth now under this method?
This post aims to be constructive but can be safely ignored.
Title: Re: PTON - Peloton
Post by: Dalal.Holdings on February 14, 2021, 08:38:44 PM
Not bashing it. But was there any post on this that looked like an investment analysis? Off balance sheet - the brand and community is a valuable asset. Not sure how that translates into a great business. It maybe similar to gymshark - where it’s a clothing store worth $1B in 10 years.

Think there’s easier ways to make money. Congrats to the longs, hope the investment continues to pay dividends.

I keep seeing how it must be a fad because everything else in the exercise space has been a fad in the past...nothing specific to the company or the product though. That's not analysis, that's lazy.


Over a million connected subscribers and rapidly growing (as are workouts per mo per subscription), $1.5B net cash on the balance sheet, $500M FCF TTM, & they are buying Precor, struggling to meet demand...so what's your bearish price target based on all this?
Title: Re: PTON - Peloton
Post by: valueinvestor on February 14, 2021, 10:23:22 PM
That's what I was asking haha - I have no opinion as of yet. Just merely pointing out that not many had a long thesis where they would a majority of their net worth into it.

There were easier plays to me at the time such as APPS or atleast to me it was easier. Although I agree with you that some are NAV investors rather than value investors when it comes to equities. There is value and an argument could've that the moat was worth $XB. Just merely pointing out that no one really did state that. Nor it is their job or maybe they wanted to keep it to themselves until they build a full position and/or want prices to stay low as long as possible - like me with some positions.

Lastly, if there was a bearish target why sell out? Did you find a better idea?

Did you invest because of the majority of the thesis was business quality or rather it was event-driven?
Title: Re: PTON - Peloton
Post by: Broeb22 on February 15, 2021, 05:26:04 AM
Not bashing it. But was there any post on this that looked like an investment analysis? Off balance sheet - the brand and community is a valuable asset. Not sure how that translates into a great business. It maybe similar to gymshark - where it’s a clothing store worth $1B in 10 years.

Think there’s easier ways to make money. Congrats to the longs, hope the investment continues to pay dividends.

I keep seeing how it must be a fad because everything else in the exercise space has been a fad in the past...nothing specific to the company or the product though. That's not analysis, that's lazy.


Over a million connected subscribers and rapidly growing (as are workouts per mo per subscription), $1.5B net cash on the balance sheet, $500M FCF TTM, & they are buying Precor, struggling to meet demand...so what's your bearish price target based on all this?

What happens to capacity levels once they meet this literally once-in-a-hundred year demand due to a pandemic coupled with massive fiscal stimulus that gives people the $ to pay for the product?

Reasonable people can come to different conclusions on these things, and you add ZERO to the discussion by regurgitating the company's press release. Color me skeptical that the TTM FCF or Forward FCF estimates are levels from which Peloton can grow from once they meet this demand.
Title: Re: PTON - Peloton
Post by: Dalal.Holdings on February 15, 2021, 06:01:50 AM
Not bashing it. But was there any post on this that looked like an investment analysis? Off balance sheet - the brand and community is a valuable asset. Not sure how that translates into a great business. It maybe similar to gymshark - where it’s a clothing store worth $1B in 10 years.

Think there’s easier ways to make money. Congrats to the longs, hope the investment continues to pay dividends.

I keep seeing how it must be a fad because everything else in the exercise space has been a fad in the past...nothing specific to the company or the product though. That's not analysis, that's lazy.


Over a million connected subscribers and rapidly growing (as are workouts per mo per subscription), $1.5B net cash on the balance sheet, $500M FCF TTM, & they are buying Precor, struggling to meet demand...so what's your bearish price target based on all this?

What happens to capacity levels once they meet this literally once-in-a-hundred year demand due to a pandemic coupled with massive fiscal stimulus that gives people the $ to pay for the product?

Reasonable people can come to different conclusions on these things, and you add ZERO to the discussion by regurgitating the company's press release. Color me skeptical that the TTM FCF or Forward FCF estimates are levels from which Peloton can grow from once they meet this demand.

Yes of course, it’s all pandemic induced! And all those upper middle class types who are buying this must be eligible for stim checks!

Apparently I’m “repeating press releases” by quoting figures from the financial statements and actual subscriber counts...lol...

And what are you adding exactly? What’s your valuation number?
Title: Re: PTON - Peloton
Post by: clutch on February 15, 2021, 06:13:12 AM
Looking at the discussions, it seems that you can EASILY make the argument for either case. Especially the argument regarding this has a similar brand value as iPhone or a fad like Bowflex. There are enough examples on both sides but none of them are that useful IMO, considering the short history of PTON. Similar thing with financials/valuation.

At the end of the day, I think you need to predict whether this at-home virtual exercise trend will grow at the current rate. If you think there was a temporary boost due to the pandemic, you would not bet on it... On the other hand, you think at-home workouts will continue to grow (like WFH), I do see the case for investing in the best names like PTON...

To me, that's the bottom line and it's almost fruitless to talk around other points... I guess this is true with many high-growth stocks.  ::)
Title: Re: PTON - Peloton
Post by: widenthemoat on February 15, 2021, 09:18:55 AM
Not bashing it. But was there any post on this that looked like an investment analysis? Off balance sheet - the brand and community is a valuable asset. Not sure how that translates into a great business. It maybe similar to gymshark - where it’s a clothing store worth $1B in 10 years.

Think there’s easier ways to make money. Congrats to the longs, hope the investment continues to pay dividends.

I keep seeing how it must be a fad because everything else in the exercise space has been a fad in the past...nothing specific to the company or the product though. That's not analysis, that's lazy.


Over a million connected subscribers and rapidly growing (as are workouts per mo per subscription), $1.5B net cash on the balance sheet, $500M FCF TTM, & they are buying Precor, struggling to meet demand...so what's your bearish price target based on all this?

What happens to capacity levels once they meet this literally once-in-a-hundred year demand due to a pandemic coupled with massive fiscal stimulus that gives people the $ to pay for the product?

Reasonable people can come to different conclusions on these things, and you add ZERO to the discussion by regurgitating the company's press release. Color me skeptical that the TTM FCF or Forward FCF estimates are levels from which Peloton can grow from once they meet this demand.

Yes of course, it’s all pandemic induced! And all those upper middle class types who are buying this must be eligible for stim checks!

Apparently I’m “repeating press releases” by quoting figures from the financial statements and actual subscriber counts...lol...

And what are you adding exactly? What’s your valuation number?

No horse in this race, but I'll take a shot at valuation. As you mentioned, let's use $500.0m as our starting point for distributable cash flow. Well, assuming they didn't want to grow anymore, they would distribute all of that annually. I would probably be willing to pay $5.0 billion or so for that cash flow stream. Obviously, the play here is to grow the business and the brand, so we won't be seeing any dividends for a long time. Taking a look at the current cost of $45.0 billion, we clearly have quite a bit of growing to do before we get any reasonable rate of return on our investment in terms of actual cash distributions.

The two key questions here are when are we going to get the distributions and how much will they be? Assuming we got them today, I would be wiling to pay $45.0 billion for $4.5 billion of cash distributions every year. For every year we wait, that $4.5 billion of annual cash distributions needs to grow by 10% to compensate for my capital being tied up. Assuming we wait 15 years, that means PTON will need to be distributing ~$19.0b annually to investors.

What does $19.0b imply in terms of customers? Well, for simplicity, lets just assume no prices increases and no new products. Obviously this isn't reality and if you can fill in the numbers with realistic assumptions feel free to do so, I'm just giving a simple example. Each subscriber earns PTON $550 annually ($550m FCF / 1.0m subscribers). That means PTON will need to have ~35.0 million customers in 15 years time.

There are about 140m homes in the United States, and 50% of these are earning less than $75,000. That means there are probably 70 million homes that could even come close to affording an annual subscription to PTON. 50% of those homes will need to have a Peloton in 15 years time to make the valuation work. Keep in mind, this is for a 10% rate of return and ZERO margin of safety...

Note: I haven't looked into PTON at all. This was pulled together very quickly and I'm using simple estimates. Feel free to critique as needed, I just wanted to provide some numbers for the discussion.
Title: Re: PTON - Peloton
Post by: Dalal.Holdings on February 15, 2021, 10:23:46 AM

No horse in this race, but I'll take a shot at valuation. As you mentioned, let's use $500.0m as our starting point for distributable cash flow. Well, assuming they didn't want to grow anymore, they would distribute all of that annually. I would probably be willing to pay $5.0 billion or so for that cash flow stream. Obviously, the play here is to grow the business and the brand, so we won't be seeing any dividends for a long time. Taking a look at the current cost of $45.0 billion, we clearly have quite a bit of growing to do before we get any reasonable rate of return on our investment in terms of actual cash distributions.

The two key questions here are when are we going to get the distributions and how much will they be? Assuming we got them today, I would be wiling to pay $45.0 billion for $4.5 billion of cash distributions every year. For every year we wait, that $4.5 billion of annual cash distributions needs to grow by 10% to compensate for my capital being tied up. Assuming we wait 15 years, that means PTON will need to be distributing ~$19.0b annually to investors.

What does $19.0b imply in terms of customers? Well, for simplicity, lets just assume no prices increases and no new products. Obviously this isn't reality and if you can fill in the numbers with realistic assumptions feel free to do so, I'm just giving a simple example. Each subscriber earns PTON $550 annually ($550m FCF / 1.0m subscribers). That means PTON will need to have ~35.0 million customers in 15 years time.

There are about 140m homes in the United States, and 50% of these are earning less than $75,000. That means there are probably 70 million homes that could even come close to affording an annual subscription to PTON. 50% of those homes will need to have a Peloton in 15 years time to make the valuation work. Keep in mind, this is for a 10% rate of return and ZERO margin of safety...

Note: I haven't looked into PTON at all. This was pulled together very quickly and I'm using simple estimates. Feel free to critique as needed, I just wanted to provide some numbers for the discussion.

Well, for starters: paying 10x multiple for a rapidly growing biz with a wide moat is laughable. Also, the FCF margins will be low when the revenue is coming from selling bikes/treadmills. When it becomes largely subscription revenues, the margins will obviously be much higher...

But i'll bite anyway: at 10x valuation which you use (many tech companies have historically been 30x or higher), PTON would be worth $5B + 1.5B net cash = $6.5B or about $22 per share. At least we have a bear case now. It hit this price in the last 12 mo and folks were still willing to say "it's a short".

My question to those who consider this a fad: "what would prove to you it's not a fad?"


Also to your point here:
Quote
that $4.5 billion of annual cash distributions needs to grow by 10% to compensate for my capital being tied up.

Is this your hurdle rate? What investment are you finding these days that you can buy at 10 P/E growing earnings 10% a year? You would consider such an investment to have "zero margin of safety"?
Title: Re: PTON - Peloton
Post by: widenthemoat on February 15, 2021, 10:30:29 AM

No horse in this race, but I'll take a shot at valuation. As you mentioned, let's use $500.0m as our starting point for distributable cash flow. Well, assuming they didn't want to grow anymore, they would distribute all of that annually. I would probably be willing to pay $5.0 billion or so for that cash flow stream. Obviously, the play here is to grow the business and the brand, so we won't be seeing any dividends for a long time. Taking a look at the current cost of $45.0 billion, we clearly have quite a bit of growing to do before we get any reasonable rate of return on our investment in terms of actual cash distributions.

The two key questions here are when are we going to get the distributions and how much will they be? Assuming we got them today, I would be wiling to pay $45.0 billion for $4.5 billion of cash distributions every year. For every year we wait, that $4.5 billion of annual cash distributions needs to grow by 10% to compensate for my capital being tied up. Assuming we wait 15 years, that means PTON will need to be distributing ~$19.0b annually to investors.

What does $19.0b imply in terms of customers? Well, for simplicity, lets just assume no prices increases and no new products. Obviously this isn't reality and if you can fill in the numbers with realistic assumptions feel free to do so, I'm just giving a simple example. Each subscriber earns PTON $550 annually ($550m FCF / 1.0m subscribers). That means PTON will need to have ~35.0 million customers in 15 years time.

There are about 140m homes in the United States, and 50% of these are earning less than $75,000. That means there are probably 70 million homes that could even come close to affording an annual subscription to PTON. 50% of those homes will need to have a Peloton in 15 years time to make the valuation work. Keep in mind, this is for a 10% rate of return and ZERO margin of safety...

Note: I haven't looked into PTON at all. This was pulled together very quickly and I'm using simple estimates. Feel free to critique as needed, I just wanted to provide some numbers for the discussion.

Well, for starters: paying 10x multiple for a rapidly growing biz with a wide moat is laughable. Also, the FCF margins will be low when the revenue is coming from selling bikes/treadmills. When it becomes largely subscription revenues, the margins will obviously be much higher...

At 10x, PTON would be worth $5B + 1.5B net cash = $6.5B or about $22 per share. At least we have a bear case now. It hit this price in the last 12 mo and folks were still willing to say "it's a short".

My question to those who consider this a fad: "what would prove to you it's not a fad?"


Also to your point here:
Quote
that $4.5 billion of annual cash distributions needs to grow by 10% to compensate for my capital being tied up.

Is this your hurdle rate? What investment are you finding these days that you can buy at 10 P/E growing earnings 10% a year? You would consider such an investment to have "zero margin of safety"?

I don't think you understood my post correctly, I'm not saying its worth 10x earnings. I'm taking the current valuation and figuring out how much cash it needs to pay me to earn a 10% return. In 15 years it likely won't still be growing at 30% so I apply a 10x multiple at that point, which is when I assume distributions begin. This takes all of that growth into consideration. And yes, 10% is my hurdle rate. I view buying a stock through the lens that I would never sell. A 1.0% yield for the rest of my life doesn't sound very appealing to me. If you don't think of it that way you are speculating in my opinion, plain and simple.
Title: Re: PTON - Peloton
Post by: clutch on February 15, 2021, 10:37:13 AM
My question to those who consider this a fad: "what would prove to you it's not a fad?"

Whether something is a fad or not is not provable either way at the moment. The only way we can find out is in the future if it sticks around or not.

Hence the need to speculate on investments like this. At best you could estimate the probabilities of PTON sticking vs. becoming a fad and apply them to your valuations accordingly.
Title: Re: PTON - Peloton
Post by: KJP on February 15, 2021, 10:39:19 AM
Not bashing it. But was there any post on this that looked like an investment analysis? Off balance sheet - the brand and community is a valuable asset. Not sure how that translates into a great business. It maybe similar to gymshark - where it’s a clothing store worth $1B in 10 years.

Think there’s easier ways to make money. Congrats to the longs, hope the investment continues to pay dividends.

I keep seeing how it must be a fad because everything else in the exercise space has been a fad in the past...nothing specific to the company or the product though. That's not analysis, that's lazy.


Over a million connected subscribers and rapidly growing (as are workouts per mo per subscription), $1.5B net cash on the balance sheet, $500M FCF TTM, & they are buying Precor, struggling to meet demand...so what's your bearish price target based on all this?

What happens to capacity levels once they meet this literally once-in-a-hundred year demand due to a pandemic coupled with massive fiscal stimulus that gives people the $ to pay for the product?

Reasonable people can come to different conclusions on these things, and you add ZERO to the discussion by regurgitating the company's press release. Color me skeptical that the TTM FCF or Forward FCF estimates are levels from which Peloton can grow from once they meet this demand.

Yes of course, it’s all pandemic induced! And all those upper middle class types who are buying this must be eligible for stim checks!

Apparently I’m “repeating press releases” by quoting figures from the financial statements and actual subscriber counts...lol...

And what are you adding exactly? What’s your valuation number?

No horse in this race, but I'll take a shot at valuation. As you mentioned, let's use $500.0m as our starting point for distributable cash flow. Well, assuming they didn't want to grow anymore, they would distribute all of that annually. I would probably be willing to pay $5.0 billion or so for that cash flow stream. Obviously, the play here is to grow the business and the brand, so we won't be seeing any dividends for a long time. Taking a look at the current cost of $45.0 billion, we clearly have quite a bit of growing to do before we get any reasonable rate of return on our investment in terms of actual cash distributions.

The two key questions here are when are we going to get the distributions and how much will they be? Assuming we got them today, I would be wiling to pay $45.0 billion for $4.5 billion of cash distributions every year. For every year we wait, that $4.5 billion of annual cash distributions needs to grow by 10% to compensate for my capital being tied up. Assuming we wait 15 years, that means PTON will need to be distributing ~$19.0b annually to investors.

What does $19.0b imply in terms of customers? Well, for simplicity, lets just assume no prices increases and no new products. Obviously this isn't reality and if you can fill in the numbers with realistic assumptions feel free to do so, I'm just giving a simple example. Each subscriber earns PTON $550 annually ($550m FCF / 1.0m subscribers). That means PTON will need to have ~35.0 million customers in 15 years time.

There are about 140m homes in the United States, and 50% of these are earning less than $75,000. That means there are probably 70 million homes that could even come close to affording an annual subscription to PTON. 50% of those homes will need to have a Peloton in 15 years time to make the valuation work. Keep in mind, this is for a 10% rate of return and ZERO margin of safety...

Note: I haven't looked into PTON at all. This was pulled together very quickly and I'm using simple estimates. Feel free to critique as needed, I just wanted to provide some numbers for the discussion.

I did a similar back-of-the-envelope exercise several months ago on this thread when the stock was much cheaper:  https://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/peloton/msg413661/#msg413661

I also have no stake in Peloton either way, so I just do this stuff as a mental exercise.  I have a few questions about your quick overview:

1) Why is the TAM only the US?  It seems to me that a connected bike might sell anywhere in the world.

2)  Can your FCF/sub be right?  550/12 = $45/month at 100% FCF margin.  But a full membership is only $40/month and there are COGS and OpEx associated with them.  Does your $550 annual number include some FCF associated with equipment sales?  If so, I believe that FCF line item would scale down as a percentage of the business as a greater and greater percentage of subs come from the existing installed base rather than new purchases (if that's not happening, then the business likely has a big churn problem).  On the other hand, FCF margins are the subscription ought to rise over time with scale.

3)  I suspect that the current valuation includes significant option value for potentially large ancillary business lines like apparel, energy drinks, etc.  I have no idea how to value those options.
Title: Re: PTON - Peloton
Post by: Dalal.Holdings on February 15, 2021, 10:53:27 AM
My question to those who consider this a fad: "what would prove to you it's not a fad?"

Whether something is a fad or not is not provable either way at the moment. The only way we can find out is in the future if it sticks around or not.

Hence the need to speculate on investments like this. At best you could estimate the probabilities of PTON sticking vs. becoming a fad and apply them to your valuations accordingly.

The company is about 9 years old. There are big companies who have indicated they want to enter the space (AAPL). How much time do you need until you can figure out whether this is a fad or not?

Yes, you need to do a probabilistic assessment, not just say "Lol, it's obviously a fad". My p(fad) is low and getting lower as time goes on.
Title: Re: PTON - Peloton
Post by: Dalal.Holdings on February 15, 2021, 10:58:55 AM

I did a similar back-of-the-envelope exercise several months ago on this thread when the stock was much cheaper:  https://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/peloton/msg413661/#msg413661

I also have no stake in Peloton either way, so I just do this stuff as a mental exercise.  I have a few questions about your quick overview:

1) Why is the TAM only the US?  It seems to me that a connected bike might sell anywhere in the world.

2)  Can your FCF/sub be right?  550/12 = $45/month at 100% FCF margin.  But a full membership is only $40/month and there are COGS and OpEx associated with them.  Does your $550 annual number include some FCF associated with equipment sales?  If so, I believe that FCF line item would scale down as a percentage of the business as a greater and greater percentage of subs come from the existing installed base rather than new purchases (if that's not happening, then the business likely has a big churn problem).  On the other hand, FCF margins are the subscription ought to rise over time with scale.

3)  I suspect that the current valuation includes significant option value for potentially large ancillary business lines like apparel, energy drinks, etc.  I have no idea how to value those options.

You make some good points. To limit the TAM just to U.S. households is extremely narrow minded. For one, the Precor acquisition will open to PTON being able to install their software on existing commercial equipment throughout the world (existing gyms, hotels, etc)...

They are already doing well internationally in a few select countries. Apparel is a call option
Title: Re: PTON - Peloton
Post by: Broeb22 on February 15, 2021, 11:03:20 AM
75% of all the revenue PTON has ever generated has occurred in the last 2 years, and the percent is 90% for the last 3 years. Maybe it could still be a fad after all.
Title: Re: PTON - Peloton
Post by: Dalal.Holdings on February 15, 2021, 03:38:54 PM
75% of all the revenue PTON has ever generated has occurred in the last 2 years, and the percent is 90% for the last 3 years. Maybe it could still be a fad after all.

When a company is growing revenue 100% per year, the most recent years will have a majority of the revenue. And only one of those years had the pandemic, so there's that.

If in years 1, 2, 3, 4, 5 I make $2, $4, $8, $16, $32, the majority of my revenue will have occurred in the latter years...

I wouldn't spin 100% revenue growth into a weakness though--in fact, that would perk up my attention, but that's me.
Title: Re: PTON - Peloton
Post by: widenthemoat on February 15, 2021, 03:53:53 PM
Not bashing it. But was there any post on this that looked like an investment analysis? Off balance sheet - the brand and community is a valuable asset. Not sure how that translates into a great business. It maybe similar to gymshark - where it’s a clothing store worth $1B in 10 years.

Think there’s easier ways to make money. Congrats to the longs, hope the investment continues to pay dividends.

I keep seeing how it must be a fad because everything else in the exercise space has been a fad in the past...nothing specific to the company or the product though. That's not analysis, that's lazy.


Over a million connected subscribers and rapidly growing (as are workouts per mo per subscription), $1.5B net cash on the balance sheet, $500M FCF TTM, & they are buying Precor, struggling to meet demand...so what's your bearish price target based on all this?

What happens to capacity levels once they meet this literally once-in-a-hundred year demand due to a pandemic coupled with massive fiscal stimulus that gives people the $ to pay for the product?

Reasonable people can come to different conclusions on these things, and you add ZERO to the discussion by regurgitating the company's press release. Color me skeptical that the TTM FCF or Forward FCF estimates are levels from which Peloton can grow from once they meet this demand.

Yes of course, it’s all pandemic induced! And all those upper middle class types who are buying this must be eligible for stim checks!

Apparently I’m “repeating press releases” by quoting figures from the financial statements and actual subscriber counts...lol...

And what are you adding exactly? What’s your valuation number?

No horse in this race, but I'll take a shot at valuation. As you mentioned, let's use $500.0m as our starting point for distributable cash flow. Well, assuming they didn't want to grow anymore, they would distribute all of that annually. I would probably be willing to pay $5.0 billion or so for that cash flow stream. Obviously, the play here is to grow the business and the brand, so we won't be seeing any dividends for a long time. Taking a look at the current cost of $45.0 billion, we clearly have quite a bit of growing to do before we get any reasonable rate of return on our investment in terms of actual cash distributions.

The two key questions here are when are we going to get the distributions and how much will they be? Assuming we got them today, I would be wiling to pay $45.0 billion for $4.5 billion of cash distributions every year. For every year we wait, that $4.5 billion of annual cash distributions needs to grow by 10% to compensate for my capital being tied up. Assuming we wait 15 years, that means PTON will need to be distributing ~$19.0b annually to investors.

What does $19.0b imply in terms of customers? Well, for simplicity, lets just assume no prices increases and no new products. Obviously this isn't reality and if you can fill in the numbers with realistic assumptions feel free to do so, I'm just giving a simple example. Each subscriber earns PTON $550 annually ($550m FCF / 1.0m subscribers). That means PTON will need to have ~35.0 million customers in 15 years time.

There are about 140m homes in the United States, and 50% of these are earning less than $75,000. That means there are probably 70 million homes that could even come close to affording an annual subscription to PTON. 50% of those homes will need to have a Peloton in 15 years time to make the valuation work. Keep in mind, this is for a 10% rate of return and ZERO margin of safety...

Note: I haven't looked into PTON at all. This was pulled together very quickly and I'm using simple estimates. Feel free to critique as needed, I just wanted to provide some numbers for the discussion.

I did a similar back-of-the-envelope exercise several months ago on this thread when the stock was much cheaper:  https://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/peloton/msg413661/#msg413661

I also have no stake in Peloton either way, so I just do this stuff as a mental exercise.  I have a few questions about your quick overview:

1) Why is the TAM only the US?  It seems to me that a connected bike might sell anywhere in the world.

2)  Can your FCF/sub be right?  550/12 = $45/month at 100% FCF margin.  But a full membership is only $40/month and there are COGS and OpEx associated with them.  Does your $550 annual number include some FCF associated with equipment sales?  If so, I believe that FCF line item would scale down as a percentage of the business as a greater and greater percentage of subs come from the existing installed base rather than new purchases (if that's not happening, then the business likely has a big churn problem).  On the other hand, FCF margins are the subscription ought to rise over time with scale.

3)  I suspect that the current valuation includes significant option value for potentially large ancillary business lines like apparel, energy drinks, etc.  I have no idea how to value those options.

Lol, great minds think alike. I think your assumptions are probably more accurate, I didn't spend much time on mine. I just wanted to put together some actual numbers instead of talking about brands. I don't care how strong the brand is if it doesn't make any money. Auto makers have very strong brands in my opinion, but the businesses are crap. There is a difference. Either way, the argument to buy needs to arrange these variables in a certain way, figure out how much cash the company will disgorge, and then have a huge margin of safety on top of that. So basically whatever value we come up with using these variables, we should only be willing to pay half of that. That is a very tall order in my book.
Title: Re: PTON - Peloton
Post by: Broeb22 on February 28, 2021, 09:52:18 AM
Steven Wood bullishly writing about a stock continues to be a reliable bearish indicator.

Damn, was it higher interest rates, or was it reopening parts of NYC, or some other impossible to foresee catalyst that took this from the $160s to $120?
Title: Re: PTON - Peloton
Post by: Dalal.Holdings on March 01, 2021, 01:47:45 PM
Steven Wood bullishly writing about a stock continues to be a reliable bearish indicator.

Damn, was it higher interest rates, or was it reopening parts of NYC, or some other impossible to foresee catalyst that took this from the $160s to $120?

So, to summarize:

Price goes to $25 to $160s: "Price is irrelevant, fundamentals are what matter"

Price goes from $160s to $120: "Lol, this was so predictable"