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What's In Store For Peloton In 2022

Jared Simons profile picture
Jared Simons


  • The Global Connected Gym Equipment market is expected to reach $1.5 trillion in market value by 2024.
  • The key to Peloton's long-term success will revolve around its ability to evolve as a global brand and community while continuing to drive engagement through fitness.
  • Peloton sports a 70 net promoter score, which is a good indicator of how favorable subscribers view their Peloton experience.
  • In today's article, we'll explore what went wrong for Peloton in 2021 and whether or not Peloton is a buy today trading at $35.
  • Looking for a portfolio of ideas like this one? Members of Beating the Market get exclusive access to our model portfolio. Learn More »

Man on exercise bike at home, supportive partner

kali9/E+ via Getty Images

Investment Thesis

Peloton’s been on quite the ride over the past 12 months. Rewind a year ago, the company was free cash flow positive, and demand for Pelotons was through the roof. Fast forward to today, the company’s facing challenges


This article was written by

Jared Simons profile picture
Jared brings a Peter-Peter approach to his role as Equity Analyst at Porter & Co. That’s to say he takes what he’s learned from studying Peter Lynch and Peter Thiel and uses those insights to identify disruptive innovators – with a special focus on companies that are democratizing financial services. Prior to joining Porter & Co, Jared was the Lead Analyst at L.A. Stevens Investments and the ‘Beating the Market’ service on Seeking Alpha. Jared graduated from the University of Florida, Warrington College of Business with a Finance degree. Jared enjoys studying investor psychology and the history of capital markets, and when he doesn’t have his face in a book, you can usually find him on a golf course.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of PTON either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (131)

Best article I’ve read on PTON without all the emotions. Mgt screwed up as described here for sure, but there is a good business hiding here once supply chain woes and opex addressed in short term.
Authors under 40 dont recall what happened in 1999-2001 or 2006-2009 really. They may have read some case studies etc but in order to understand it you have to LIVE IT. I will explain--In 2000 I was buying using money I did not have and lost money I did not have to lose. It happened SO FAST. One minute it is part of the back and forth between high and lows and suddenly you are underwater and trying to get back but no...In 2007 I saw what was happening and SOLD my entire 401K into cash (13600 dow sell with 14K DOW top) and I bought stocks and real estate in 2009-2011 so did really well.

This time 2021---I have been 75% SHORT and picked the highest value piece of junk which was Peloton as my target. been short since $155. Now when the NASDAQ whipsaws I will be short about 10 overvalued companies...Eventually shorting TSLA...(not yet)

---What goes up will come down---law of gravity and stocks that dont make PROFITS....
@YO long-short There is no set rule a stock has to correct 50% or even 80% buddy. You simply got lucky because of the issues Peloton has had(But it was mostly obvious the demand was going to fall off months ago). Stocks do what they want to do. Your assumption is purely based on yourself using what margin years ago? That is on you. Most growth investors today(Smart ones) are told to never use margin and those that listen to them don't as well. I have never met one popular growth investor who uses margin. As for Peloton at somepoint they may or may not be a good investment. I still don't think they are today.
Sage555 profile picture
What does one say other than public memory is short
BMO analyst Simeon Siegel said in a note Wednesday that, while he has long advocated Peloton increasing rather than decreasing prices to improve margins, “this feels like another indication of a company operating a large-scale trial and error, testing options on its customers in real-time.”

Lately, it seems like Peloton is throwing a lot of ideas at the wall and seeing what—if anything—sticks. CNBC also reported earlier this week Peloton is working with managing consulting group McKinsey & Co. to review its cost structure, looking at potentially cutting some stores and even its apparel division. YipitData shows Peloton had nearly 150 stores open world-wide as of the end of last year, up from less than 100 stores at the end of 2019. It launched a private label apparel brand less than five months ago.

For a company that is trying to “democratize fitness,” moving to democratize costs seems a bit at odds.

From: WSJ
Author: "Looking for a portfolio of ideas like this one? Members of Beating the Market get exclusive access to our model portfolio."

David Harper, CFA profile picture
@greedyfellow It's unfortunate, the BTM picks have just seen an absolute bloodbath. I quit the service in November, as I didn't think they were listening to what was coming (not seeing the whole chessboard). Their fever was too much, but I wouldn't wish that portfolio on my enemies, a lot of -60% or worse. The problem with having a service is that you sort of are compelled to attach to your holdings (to fight for them) when, as an investor, you can't afford attachment.
@David Harper, CFA "It's unfortunate????" What do you expect when you follow a 20 some year old wannabe expert? SA has way too many of these who feel they are smart and in the end make fools out of themselves while investors lose money. BTM slogan is: "We Focus on Making Lives Meaningfully Better." Really? This is childish at best!!
David Harper, CFA profile picture
@Hans Klaas well, that statement is a reflection of Louis' sincere aspiration to connect to a higher purpose (is my understanding) and to outperform. As to the intention, I admire it. And, I don't mind following a 20-year old, or a 30-year old ... But I was writing long, careful-worded warnings in the BTM forums. Simply because I follow other people (in particular, the brilliant Lyn Alden, who I was quoting, she saw this coming ...), so I was fortunate enough to exit that car before the worst wreckage. But they weren't going to listen to me. I realized I'm a better investor because I have the HUMILITY to listen to other voices, as I wrote, to try and see the whole chessboard. You cannot get too attached (which is extra temptation when you are selling a subscription service, I fear). You've got to stay HUMBLE and NIMBLE and want to listen to opposing viewpoints.
This aged well.
@khansfman09 lol, the contributor is a little dipshit who wants to make a name for himself while pumping his own holding....
@Hans Klaas you should see their real leadership..
I have been telling ANYONE and EVERYONE this was going to happen and now its happening.

It has been happening. It just unrolls so slow you dont see it from afar. SA should let me write articles ---

GET OUT!! article over
LocoRunner profile picture
Man this "trading at $35" sure aged well
You must really be bullish now.
JMS3382001 profile picture
I am starting to think the Louis Stevens Valuation model only works in a raging bull market.
@JMS3382001 It's sad they never take accountability for their mistakes.
Intrinsic value of $110. per share?! Someone better adjust the the stock price model. "when the tide rolls out...".
The original contributor has egg on his face.
What a surprise....Makes you wonder about others here.
Not to be negative, but so many of them are clueless, wannabe experts.
Really makes you wonder about the value of SA....
@Hans Klaas some contributors are great, some not so much. It’s ultimately up to your own critical thinking.
If this dips under 20, a bargain aquisition target. great bad, its has staying power. just not a $100 stock. great company and product and brand. Nike? Apple?
@nickc333 lol no. Worth under $10. Apple wouldnt touch it with a ten-foot pole. Nike has its own home fitness platform too so makes little sense to manage two brands.
Nice pick Jared! You guys really know how to pick them.
buying precor was a huge mistake...one of many
Still bullish?
By hiring McKinsey I think Peloton is ADMITTING they are in "SURVIVAL MODE". Growth is over and now they are PRE PANIC mode.

Too many obligations (123 long term leases for stores) (HQ in NYC) (4 manufacturing plants) (10K employees) etc....
The pros sure played the joe's on this pos stock. Irrational exuberance never ends. As always, sooner or later profits matter.
Another contributor who is clueless...I am an Amazon driver who visits about 150 homes per day, many with the garage doors open. I can't tell you the number of fancy treadmills and exercise bikes I see collecting dust in these garages. People simply hate going nowhere, it's boring as hell, and the confined space of a room along with being alone in there is simply not enjoyable. Everybody buys this stuff with good intentions, and that is where it ends. Peloton is no exception. People feel good that they bought the bike...it's like a New Years resolution to join the gym. Ask any gym manager what happens to these resolutions after a few weeks. I rather take a long brisk walk outside, although after working at Amazon for 2 years, I have lost over 30 pounds, and best of all, I keep it off. There are plenty of viable investment opportunities around: Low cap value funds present a very good choice right now, according to Morningstar.
@Hans Klaas This is something that has held true throughout time. However, I would argue that the additional subscription model for some people can push them to use the equipment more often. I would place a higher focus on subscribers to Peloton instead of the equipment. (Also consider, they have a higher margin from subscription revenues)

The rebuy potential on the hardware side with gym equipment is very very low. Most people are less apt to upgrade their equipment once they spend (for most) a lot of money on a piece of exercise equipment. Additionally, the space required to place additional equipment becomes a commodity in a consumer's home.

Currently, the new subscriber numbers have shown slower growth when compared to the beginning of the pandemic which is to be expected. What I am looking for is not for Peloton to continue the growth they had during the beginning of the pandemic but that there is continuous growth in their subscriber number. I am neutral on PTON.
@CKF Investing --The problem is that you are correct. Subs are the key to making a profit (business) but they need 5 million and have only 2.5. They only got 1 million from pandemic year which was too few. They do need faster growth or they will run out of money. Quick math says they need pandemic growth to reach their sub target in 2 1./2 years. Since they cant get the subs then what?
@YO long-short I would say it is unlikely that they would be able to hit the necessary Subs in a reasonable time given the current content offered. I think the problem lies in the limitation of their TAM when focusing on the cardio community. A lot of cardio enthusiast prefer to do cardio outdoors. It is possible and speculation on my part that they could increase their TAM if they were to expand their product offerings to the lifting community. This could be done through an acquisition of a company like Tonal.

As to them running out of money, this is a likelihood unless their cost cutting can make them into a more efficient company. However, I am not bullish when a company has to announce cost cutting measures especially in a growth company.
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