Paulo Carvalho de Sa
๐ŸŒŽ ๐—ง๐—›๐—˜ ๐—Ÿ๐—”๐—ฅ๐—š๐—˜๐—ฆ๐—ง ๐—œ๐—ก๐—ง๐—˜๐—ฅ๐—”๐—–๐—ง๐—œ๐—ฉ๐—˜ ๐—™๐—œ๐—ง๐—ก๐—˜๐—ฆ๐—ฆ ๐—ฃ๐—Ÿ๐—”๐—ง๐—™๐—ข๐—ฅ๐—  ๐—œ๐—ก ๐—ง๐—›๐—˜ ๐—ช๐—ข๐—ฅ๐—Ÿ๐—— $PTON (Peloton Interactive), founded in 2012, pioneered connected fitness and the streaming of digital classes. The product catalog includes two Bike models and two Tread models, combining with a subscription (more than 2 million subscribers) to access unlimited live and on-demand classes. Youโ€™re not much of a cycler or a runner? Donโ€™t worry, Peloton also has an App that will give you access to classes of strength, cardio, stretching, yoga and more workouts with no equipment required and you can watch from your phone, tablet, web or TV. ๐Ÿšด ๐—œ๐˜โ€™๐˜€ ๐—ป๐—ผ๐˜ ๐—ท๐˜‚๐˜€๐˜ ๐—ฎ ๐—ฏ๐—ถ๐—ธ๐—ฒ ๐—ฎ๐—ป๐—ฑ ๐—ฎ ๐˜€๐—ฐ๐—ฟ๐—ฒ๐—ฒ๐—ป ๐—ผ๐—ป ๐—ถ๐˜ Peloton is as much hardware as it is content (and software), both are complementary to a perfect match. While the connected fitness products account for the majority of revenue, itโ€™s a one-time revenue. As for the subscriptions, itโ€™s recurring revenue where they make 45% of gross profit, a good margin when considering the amount of content that has to be created. Pelotonโ€™s classes are an important piece of the business that drives not only additional revenue but also ๐—ต๐—ถ๐—ด๐—ต๐—ฒ๐—ฟ ๐—ฟ๐—ฒ๐˜๐—ฒ๐—ป๐˜๐—ถ๐—ผ๐—ป ๐—ฟ๐—ฎ๐˜๐—ฒ๐˜€. The fitness company creates engaging-to-the-point-of-addictive original fitness content with a proprietary music platform to fuel the workout experience that aligns with the users musical preferences. Itโ€™s all about the experience - Peloton focuses on its customer experience, which we can compare to Apple. Products are expensive and not the cheapest, but they offer a high-quality experience like any other and customers keep buying it. Proof of brand loyalty are the ones that tattooed Pelotonโ€™s logo on their body as you can see in the image below - and yes, before you say it, itโ€™s not Polkadot logo ๐Ÿ˜ƒ Peloton has the highest net promoter score of 94, among other global brands such as Apple with 47, Starbucks with 77 or Amazon with 7. Pelotonโ€™s brand also ranks in second place in an independent report called Brand Relevance Index from Prophet, with Apple being in the first place. โœ‹ ๐—•๐˜‚๐˜ ๐—ฃ๐—ฎ๐˜‚๐—น๐—ผ ๐—ด๐˜†๐—บ๐˜€ ๐—ฎ๐—ฟ๐—ฒ ๐—ฟ๐—ฒ๐—ผ๐—ฝ๐—ฒ๐—ป๐—ถ๐—ป๐—ด Yes, gyms are reopening and more people are going outside to exercise but Peloton is still winning in those conditions. Here is what we should have in mid: 1. Home fitness is the new default - in a Consumer Trends survey it was identified that 81% of Millenials prefer exercising at home and 76% of all consumers switched to exercise more at home during the pandemic. 2. Peloton acquired Precor, a commercial exercise equipment company, opening the doors to spaces such as gyms, hotels, multifamily residences, schools & universities and corporate campuses. The acquisition will also provide Peloton manufacturing capacity in the US, boost research and development capabilities and offer a different range of product types. 3. In addition to Precor, Peloton also acquired Atlas Wearables, a smartwatch maker that provides workout instructions and tracks fitness levels. This will bring another key product to complement the synergies with the current offering and enhance the brandโ€™s winning stance whether itโ€™s at home or outside. Itโ€™s a matter of time until they most likely launch a Peloton Smartwatch and Iโ€™m sure they will bring the same level of quality as they do in the current products. 4. Digital subscription will give you access to their app on your mobile phone which you can use to make classes outdoors, even if itโ€™s running, cycling, walking, etc. 5. The average gym has a yearly churn rate of around 30%, while Peloton churn rate is around 8% yearly, proving again the strong brand the company has and the capability to retain customers and provide a world-class experience. ๐Ÿ‘€ ๐—ช๐—ต๐—ฎ๐˜ ๐—ฎ๐—ฏ๐—ผ๐˜‚๐˜ ๐˜๐—ต๐—ฒ ๐—ง๐—ฟ๐—ฒ๐—ฎ๐—ฑ+ ๐—ฟ๐—ฒ๐—ฐ๐—ฎ๐—น๐—น The Consumer Product Safety Commission (CPSC) and Peloton issued a voluntary recall of the Tread+ treadmill following the incidents, which included one childโ€™s death. It hurts saying this but unfortunately it happened. Now, some argue that itโ€™s the parents fault, others that itโ€™s Peloton's fault. Whoever the fault is, I think Peloton is acting boldly on this. The company halted both tread models sales until they come to a safety measure that can prevent this type of incident from ever happening again. The company will be picking up the treadmills from customers that want to return and will offer a full refund to those. Peloton also offered the option to move the treadmill to another room within their home (a more safe place if needed). The estimated impact of the recall is $165 million. ๐Ÿ”ฎ ๐—–๐—ฟ๐˜†๐˜€๐˜๐—ฎ๐—น ๐—•๐—ฎ๐—น๐—น In the end, I believe that Pelotonโ€™s products will become safer from this situation, which will boost customers confidence and also I don't think there will be many customers recalling its treads. With such a great brand and high synergy between products, the company still has plenty of room to grow in a changing and growing industry.
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