Riding higher for 2020
Dan Caplinger (Peloton Interactive): Health and wellness have been big trends in recent years, and keeping fit is an important part of many people's lifestyles. Peloton Interactive aims to make exercise more accessible and interactive to higher-end customers by introducing home fitness equipment that includes access to professional fitness classes. With the technology that Peloton includes in its stationary bikes and treadmills, you can enjoy an interactive exercise experience in which you're directly competing against other users wherever they are.
Peloton just went public a few months ago, but it's already growing at a solid pace. The company now counts about 563,000 subscribers among its paying customer base, with users of its app bringing its total membership count to more than 1.6 million people. Peloton managed to double its quarterly revenue in just the past 12 months, and it's doing a good job of holding onto the customers it brings in, with retention rates of 94% on a 12-month basis.
Moreover, Peloton users are finding more ways to get value from the service. The number of workouts per subscriber has been on the rise, with year-over-year gains from 8.9 to 11.7 per month in the company's most recent quarterly results.
A controversial ad brought Peloton some grief during the holiday season, but many dismissed the incident as having little impact on its core user base. Meanwhile, Peloton is offering customers the chance to use Peloton equipment on a free 30-day trial basis, giving them an introduction to the service and its benefits. Once people get to use the Peloton interactive platform, it's hard to go back to regular fitness equipment -- and Peloton is banking on that leading to increased customer growth.
Peloton is also aiming to expand its product line. Facing some criticism because of the high price tags for its products -- $2,245 for stationary bikes and $4,295 for treadmills -- Peloton is looking to offer a lower-cost treadmill option as well as a rowing machine alternative. Doing so could help the company break out of the reputation it has for serving only rich customers, and introducing a broader set of exercising users would help support the key interactive workout part of the business, which benefits from having more people on the service. Also, plans to introduce apps for those who have wearable devices could drive more users onto the Peloton platform.
In many investors' eyes, Peloton hasn't been a successful stock, as the share price has had trouble staying above the $29 per share at which it priced its initial public offering. Plenty of skeptics believe that Peloton is doomed to failure, and they're betting aggressively against the stock at its current price. Yet there are a lot of high-end customers who can afford to buy Peloton equipment, and the company's growth shows that many of them see the benefits of the company's interactive experience. As network effects build, it's likely that Peloton will see continued growth heading into 2020 -- and shareholders hope the stock will follow suit.
