PTON - Peloton

[Dalal.Holdings]

We can certainly peg the outcome. To be clear, you mock the business performance going forward, not just the stock so that's an important distinction.

[Ice77]

I would mock this but I'm going to let the business performance (and by a very loose extension the stock price) do the talking.

 

“The difficulty lies not so much in developing new ideas as in escaping from old ones”

- John M Keynes

 

A Prophet survey of 13000 consumers asked them about 228 brands. Top 10 were:

1. Apple

2. Peloton (up from no. 35 in previous survey)

3. Kitchen Aid

4. Mayo Clinic

5. Lego

6. Costco

7. Honda

8. John Hopkins

9. PlayStation

10. Amazon

 

---

"When gym and studio closures deprived exercisers of their fitness fix, they knew they needed the mental health benefits of sweat. Peloton, which earns the highest score for “connects with me emotionally,” saved them, nearly doubling sales of its exercise bikes and treadmills. But more importantly, it connected them to others, both through its online communities and its constantly expanding variety of workouts available live and on-demand. These gems are powering triple-digit membership gains and impressively low dropout rates."

 

 

 

 

ProphetBRI_2021.pdf

[dwy000]

I would mock this but I'm going to let the business performance (and by a very loose extension the stock price) do the talking.

 

“The difficulty lies not so much in developing new ideas as in escaping from old ones”

- John M Keynes

 

A Prophet survey of 13000 consumers asked them about 228 brands. Top 10 were:

1. Apple

2. Peloton (up from no. 35 in previous survey)

3. Kitchen Aid

4. Mayo Clinic

5. Lego

6. Costco

7. Honda

8. John Hopkins

9. PlayStation

10. Amazon

 

---

"When gym and studio closures deprived exercisers of their fitness fix, they knew they needed the mental health benefits of sweat. Peloton, which earns the highest score for “connects with me emotionally,” saved them, nearly doubling sales of its exercise bikes and treadmills. But more importantly, it connected them to others, both through its online communities and its constantly expanding variety of workouts available live and on-demand. These gems are powering triple-digit membership gains and impressively low dropout rates."

 

I didn't read it in detail but when a brand survey has Mayo Clinic and Johns Hopkins in the Top 10 (which I'd guess 95% of the population have never used), way ahead of Netflix and Disney, while the fastest rising brand is USA Today (and United Airlines is #5), you really have to scratch your head on the value of it.

[Ice77]

Neither USA today nor United Airlines are in top 50 brands (Slide 14) while Netflix is at 18 and Disney at 36. This is a "Brand relevance" survey and not top of the mind survey. And when you rank 228 brands there could always be random movers moving 10 places up but still being way down. Doesn't imply much. The only airline I see there in top 50 is Southwest at 38. And their research partner is not some mom and pop outlet.

[Broeb22]

When is the last time you heard Kitchen Aid having relevance as a brand?

 

Perhaps people are, as has been widely reported, buying cooking/baking equipment in droves and have rediscovered the timelessness of a good mixer. Or maybe it’s just a pandemic and people are buying things to get them through this challenging time which they will quickly abandon when the opportunity presents itself.

 

Sometimes you have to have faith in things that can’t be seen or verified in a short period of time. If you’re long right now, you have all the tangible evidence in the world right now that you’re correct and that Peloton is a long-term winner. Partnerships with Beyoncé, rave reviews despite horrendous lead times, etc. But I’m trying to use common sense and think that maybe, just maybe, some of the craze around Peloton is due to this pandemic.

 

I’m neither long or short, so this is mostly an amusement to me, but there are easier ways to make money than betting on this.

 

Even Dalal sold it, so he’s just arguing for amusement’s sake too.

[A Dhandho Investor]

I would mock this but I'm going to let the business performance (and by a very loose extension the stock price) do the talking.

 

“The difficulty lies not so much in developing new ideas as in escaping from old ones”

- John M Keynes

 

A Prophet survey of 13000 consumers asked them about 228 brands. Top 10 were:

1. Apple

2. Peloton (up from no. 35 in previous survey)

3. Kitchen Aid

4. Mayo Clinic

5. Lego

6. Costco

7. Honda

8. John Hopkins

9. PlayStation

10. Amazon

 

---

"When gym and studio closures deprived exercisers of their fitness fix, they knew they needed the mental health benefits of sweat. Peloton, which earns the highest score for “connects with me emotionally,” saved them, nearly doubling sales of its exercise bikes and treadmills. But more importantly, it connected them to others, both through its online communities and its constantly expanding variety of workouts available live and on-demand. These gems are powering triple-digit membership gains and impressively low dropout rates."

 

Dalal will be pleased to see PTON on #2 but not so pleased to see Honda on #7 while Tesla is only #23  :o

[Dalal.Holdings]

When is the last time you heard Kitchen Aid having relevance as a brand?

 

Perhaps people are, as has been widely reported, buying cooking/baking equipment in droves and have rediscovered the timelessness of a good mixer. Or maybe it’s just a pandemic and people are buying things to get them through this challenging time which they will quickly abandon when the opportunity presents itself.

 

Sometimes you have to have faith in things that can’t be seen or verified in a short period of time. If you’re long right now, you have all the tangible evidence in the world right now that you’re correct and that Peloton is a long-term winner. Partnerships with Beyoncé, rave reviews despite horrendous lead times, etc. But I’m trying to use common sense and think that maybe, just maybe, some of the craze around Peloton is due to this pandemic.

 

I’m neither long or short, so this is mostly an amusement to me, but there are easier ways to make money than betting on this.

 

Even Dalal sold it, so he’s just arguing for amusement’s sake too.

 

The problem with investing based on "common sense" narratives like "it's only doing well because of the pandemic" is that the "common sense" is almost always already priced into a stock...

 

While the pandemic surely helped Peloton like it helped Netflix or Amazon, I do not think it would be wise to presume these companies are only fads/temporary phenomena or whatever.

 

And I'm not arguing just for amusement sake. I'm arguing to see if my priors are correct with each iterative updating. I like being able to spot the great companies in their early stages. That's what I see here. I'm not focused so much on valuation/stock right now though. So far, so good.

[Spekulatius]

I would mock this but I'm going to let the business performance (and by a very loose extension the stock price) do the talking.

 

“The difficulty lies not so much in developing new ideas as in escaping from old ones”

- John M Keynes

 

A Prophet survey of 13000 consumers asked them about 228 brands. Top 10 were:

1. Apple

2. Peloton (up from no. 35 in previous survey)

3. Kitchen Aid

4. Mayo Clinic

5. Lego

6. Costco

7. Honda

8. John Hopkins

9. PlayStation

10. Amazon

 

---

"When gym and studio closures deprived exercisers of their fitness fix, they knew they needed the mental health benefits of sweat. Peloton, which earns the highest score for “connects with me emotionally,” saved them, nearly doubling sales of its exercise bikes and treadmills. But more importantly, it connected them to others, both through its online communities and its constantly expanding variety of workouts available live and on-demand. These gems are powering triple-digit membership gains and impressively low dropout rates."

 

Dalal will be pleased to see PTON on #2 but not so pleased to see Honda on #7 while Tesla is only #23  :o

 

With Kitchenaid being #3, WHR looks very undervalued - only $13.5B in market cap.

[Dalal.Holdings]

"People are just buying KitchenAid because of the pandemic"-- The simplistic narrative

 

The deeper narratives:

Population shift of millenials to home buyers from renters

Popularity of baking shows/DIY cooking on Youtube/British Bake Off driving it

Prestige/intangibles of KitchenAid brand (distinct & instantly recognizable look, higher end prestige--similar to Cuisinart or Wolf, social proof driving sales, etc)

 

 

The simplistic narrative person never appreciates the Munger type factors driving a brand.

 

Here's some deprival super reaction syndrome for you (2015, far before the pandemic):

https://www.dailymail.co.uk/femail/article-3186947/The-Great-British-Bake-MIXER-scandal-Enraged-viewers-Twitter-beloved-KitchenAids-replaced-inferior-Kenwood-kMix.html

 

 

Too bad KitchenAid is just one of may of WHR's brands, most of which are mediocre and without the same cachet.

[Broeb22]

I agree it’s too bad KitchenAid is just one of WHR’s brands. I’d love to see you argue Kitchen Aid is a long-term growth stock.

[Dalal.Holdings]

I agree it’s too bad KitchenAid is just one of WHR’s brands. I’d love to see you argue Kitchen Aid is a long-term growth stock.

 

I never made that argument for KitchenAid ("long term growth"). It does show how out of touch this was:

 

When is the last time you heard Kitchen Aid having relevance as a brand?

 

Perhaps people are, as has been widely reported, buying cooking/baking equipment in droves and have rediscovered the timelessness of a good mixer. Or maybe it’s just a pandemic and people are buying things to get them through this challenging time which they will quickly abandon when the opportunity presents itself.

 

 

But yeah, divert the discussion from how confident you are in your false narratives. But whatever, I'm not here to help.

[Gregmal]

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”.

 

To be fair, if we're talking about the fundamentals, here you were cheerleading an index inclusion as evidence this isnt a fad.....and most of your "this isnt a fad" proof is confined to a period spanning less than 12 months.

 

I think the most reasonable assessment was that numbers would top out in Q1(or more loosely December 2020-March 2021) or so, and then comps would then get very tough. Only time will tell on that. Not analysts upgrades/downgrades or "research reports"...Perhaps one day it can be an excellent, cult like brand......

 

 

 

with a $12B market cap!

[Dalal.Holdings]

Nope, wasn't cheerleading the index inclusion, just pointing it out as a development in the PTON thread.

 

I'm just out there looking for evidence that the thesis was wrong (i.e. the bikes becoming drying racks like all other exercise bikes I was told would happen or sales will plummet after the pandemic). Still waiting for it. About 100% revenue growth each of the past three years at least...

 

I think it's well on the road to prominent, successful brand. $12B would be a steal for any of the tech companies to pick it up. I'm sure AAPL would love it. WhatsApp was bought for $20B

[Ice77]

NYT article: The exercise bike company’s virtual classes represent an intense new genre of content: a total curation of the mind.

https://www.nytimes.com/2021/03/16/arts/peloton-cody-rigsby-content.html?referringSource=articleShare#commentsContainer

 

"...While yoga blooms from a philosophical and spiritual tradition, spinning is about your relationship to the machine. You become one with the equipment; you literally clip yourself in. If a traditional bike ride offers some thrill from breezing around outside, Peloton represents a total mastery of the natural environment. The Peloton user submits to the uncharted terrain of Cody’s World; he decides when we are cruising down a flat road and when we are huffing up a hill..."

 

Here's an interesting one from the comment section:

"Cody? You've got to be kidding!  I'm all in with Sam Yo as well as the other instructors from London.  But that's the point.  There is so much choice among the instructors and all for one price.

 

I used to think that Peletoneers were just rich, self-absorbed people who thought going to the gym was beneath them.  Wrong, wrong, wrong!  This is far better than schlepping to the gym.... and cheaper too.

 

I've been spinning for over 10 years at my local gym and loved the communal experience.  Except for fighting traffic, finding a parking space, arguing with someone who took the bike I reserved,  putting up with people who come in late, won't turn off their phones and yap through the entire  class... You get the point.  It's easy to lose the Zen experience after going through that routine.

 

When my gym shut down last year, I rented one of their spin bikes and switched on the Peloton App.  I don't know if I will ever purchase the Peloton bike (my son bought one), but Folks, I AM NEVER GOING BACK TO THE GYM.  The home spin bike experience is too convenient and too invigorating.  And I no longer complain about the instructors since I have so many to choose from.... Sorry Cody!

 

And for those of you who decry the in-door experience and promote traditional biking, there is no comparison.    You cannot get the intense workout provided by Peloton (and other companies) while peddling on the streets dodging cars and pedestrians.

 

Thank you Peloton for saving this addicted spinner!"

[Broeb22]

NYT article: The exercise bike company’s virtual classes represent an intense new genre of content: a total curation of the mind.

https://www.nytimes.com/2021/03/16/arts/peloton-cody-rigsby-content.html?referringSource=articleShare#commentsContainer

 

"...While yoga blooms from a philosophical and spiritual tradition, spinning is about your relationship to the machine. You become one with the equipment; you literally clip yourself in. If a traditional bike ride offers some thrill from breezing around outside, Peloton represents a total mastery of the natural environment. The Peloton user submits to the uncharted terrain of Cody’s World; he decides when we are cruising down a flat road and when we are huffing up a hill..."

 

Here's an interesting one from the comment section:

"Cody? You've got to be kidding!  I'm all in with Sam Yo as well as the other instructors from London.  But that's the point.  There is so much choice among the instructors and all for one price.

 

I used to think that Peletoneers were just rich, self-absorbed people who thought going to the gym was beneath them.  Wrong, wrong, wrong!  This is far better than schlepping to the gym.... and cheaper too.

 

I've been spinning for over 10 years at my local gym and loved the communal experience.  Except for fighting traffic, finding a parking space, arguing with someone who took the bike I reserved,  putting up with people who come in late, won't turn off their phones and yap through the entire  class... You get the point.  It's easy to lose the Zen experience after going through that routine.

 

When my gym shut down last year, I rented one of their spin bikes and switched on the Peloton App.  I don't know if I will ever purchase the Peloton bike (my son bought one), but Folks, I AM NEVER GOING BACK TO THE GYM.  The home spin bike experience is too convenient and too invigorating.  And I no longer complain about the instructors since I have so many to choose from.... Sorry Cody!

 

And for those of you who decry the in-door experience and promote traditional biking, there is no comparison.    You cannot get the intense workout provided by Peloton (and other companies) while peddling on the streets dodging cars and pedestrians.

 

Thank you Peloton for saving this addicted spinner!"

 

Look, all the anecdotal reviews in the world won't change how people's behavior evolves as we get past this pandemic, and as other me-too competitors arise. Check out the Google Trends for ProForm and Myx. They show a similar trajectory to Peloton, so the interest in in-home biking is not confined to Peloton.

 

This review in particular does not hold a lot of weight. An "addicted spinner" is exactly the kind of person I would expect to buy and love Peloton. When you have a $30 billion company and are arguing that much brighter days are ahead, you need more than diehard bicyclists as evidence for the brand's mass appeal, which is what is required for it to be a good stock from here.

 

[Broeb22]

Just for funsies (and probably because some will take it a little too seriously), here are the top exercise for every year since the 50's or 60's. What an interesting trip through time.

 

The only serious observation I can offer is that while some of these phenomena crashed and burned (Shake Weights or vibrating belts anyone?), some have maintained relevance over long periods of time (the original stationary bike, treadmills, yoga, kettlebells, elliptical machines, etc.).

 

Many of the brands that brought the innovations to market did not really monetize them over a sustained period of time in the way that is being suggested Peloton will. Eventually other products came to market in classic creative destruction fashion.

 

Perhaps Peloton was perfect for this moment in time, and the exercise du jour of next year will be rock climbing as people get f*%$ out of their homes and into nature?

 

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

[Gregmal]

Exactly. Christmas 2020 was basically a "hey look at my Peloton, did you get one too?" fest....its a product of environment and circumstance. And I would be hard pressed to believe this continues. Behaviors of the masses are fairly consistent and predictable. Working out is not a national pastime in the land in which 40% of people are obese. And while one could make the case that they should make working out more of a priority....they never have and they probably never will.

 

I would love to see their sales breakdowns by region as well. I can probably guess where they have the best sales. And on top of that, those regions often have delusions of grandeur regarding themselves and their extrapolations in respect to the rest of the country/world can be quite jaded. Before I spent a couple months traveling I had various conversions with a bunch of friends and contacts...almost all of whom are in the investment business out of NY/NJ/Connecticut. I've also spoken with most of them upon returning. And all I can say is the majority of these people have no idea how things are outside of their little NY-centric bubble.

[Dalal.Holdings]

Glad we have some firm stakes in the ground. Time will tell and it won’t be long. No thesis creep allowed.

[Ice77]

At somepoint you either believe or you don’t and it’s fine either way. Reality is it’s own arbiter. We shall see

[Gregmal]

Speaking of competition...LOL/ Is Sanjeev short this?

[Broeb22]

Dalal I disagree. This could take a while to work out. These types of things can go on for a long time, so don’t feel like you can come back and declare victory in 3 months. Unfortunately for you that’s not the time frame in which I think or invest.

[Dalal.Holdings]

Dalal I disagree. This could take a while to work out. These types of things can go on for a long time, so don’t feel like you can come back and declare victory in 3 months. Unfortunately for you that’s not the time frame in which I think or invest.

 

Your “sales are only up due to the pandemic” thesis should be easily proven or disproven within 12 months.

[Broeb22]

Dalal I disagree. This could take a while to work out. These types of things can go on for a long time, so don’t feel like you can come back and declare victory in 3 months. Unfortunately for you that’s not the time frame in which I think or invest.

 

Your “sales are only up due to the pandemic” thesis should be easily proven or disproven within 12 months.

 

Agree to disagree. They are way behind on orders, so they could be fulfilling this backlog for a while, and THEN you will see sales fall.

 

By the way, I'm not sure insiders share your enthusiasm for the business.

https://twitter.com/AndrewRangeley/status/1372533587124314117?s=20

[Dalal.Holdings]

So then you’re stuck with perpetual moving of the goalposts/thesis creep like TSLAQ...Nice deflection with insider sales...a new talking point emerges.

 

Not worth my time arguing with perpetual goalpost movers. I’m out looking for evidence that my thesis is wrong. I’ll know the answer with respect to the pandemic within 12 mo.

 

Their backlogs are up to 10 weeks out, not 52 weeks...

[Ice77]

The thesis creep itself deserves an SNL skit. Expensive bike with an ipad ...fad...pandemic boost....delayed backlog....loosely correlated to stock performance ..what not. I'm sure there will be another coming soon in 6, 12, 18 months.