Company Name: Peloton Interactive
Entry Price: $113
Target Price: $150
Projected Yield: 32.70%
Time Line: 3 to 6 months
About Peloton Interactive
Peloton is one of the largest US companies providing access to online fitness and manufacturing cardio machines, the main products being fitness cycles and treadmills. Monthly subscribers get an opportunity to remotely attend classes that are streamed from the company's fitness studio.
What's the Idea?
Capitalize on a stock that might rise with the rising online fitness demand, the company being underpriced, and a unique business model.
Buy Peloton Interactive Shares >>
Why Trade Peloton Interactive?
Reason 1: Sharp Stock Price Decline
The pandemic had a positive impact on Peloton's business, as the number of subscribers went up by 87% and reached 1.33M since early this year, while the earnings rose by 62.50%. However, the recent positive news on a vaccine probably coming soon caused Peloton stock price to decline by over 20%. Despite this, there are multiple reasons that may not only lead to the recovery, but also to further rise.
Reason 2: Unique Business Model
Peloton manufactures comfortable exercise bikes and treadmills and provides access to a platform with a huge library of video workouts, which includes over 17,000 videos and live broadcasts. The platform also provides an opportunity to compete with friends, colleagues, and even celebrities while training.
The research show that competition is inherently addictive, so the competition format is quite a good incentive. The thrill of breaking a record or someone else's performance encourages people to train harder, which is confirmed with a steady increase in the average number of workouts per month among Peloton's customers. This approach to training can change user behavior, as the customers will choose to renew their subscriptions even after the lockdown gets eased or lifted and the gyms are again open.
By creating this social networking effect, Peloton was able to significantly increase its customer base; more people means more fun, and new members will be happy to join the platform, too. Thus, bringing in new customers gets much cheaper.
Sales and marketing costs, as well as earnings, can easily confirm it. Over the first three quarters of 2019, the company was able to acquire 201,000 new customers, having spent 33.40% of its earnings on sales and marketing. For the same period in 2020, Peloton was able to increase its customer base by 622,000, awith the costs amounting to just 18.70% of the earnings. The pandemic increased the networking effect, which will persist even as the lockdown is eased, although the customer base won't be growing as fast as before.
Reason 3: Stable Financial Position
With the pandemic, Peloton was able to increase its customer base by 87%, and the earnings, by 62.50%. Since Q2 2020, the company became profitable with the diluted earnings per share over the last quarter amounting to $0.23. Since early 2020, the company's free cash flow amounted to $493M. It also has a stable balance sheet and sufficient liquidity: the amount of cash is over $2B, with no borrowings. The current financial condition allows the company to successfully develop its business further. Peloton has a chance to continue growing significantly and adapt to the changing conditions.
The risk for the company is the exercising machine delivery issue, caused with a sharp increase in demand. The customers have currently to wait for a few months, so some of them may turn to other companies instead. However, Peloton's CFO said that, by the end of 2020, the supply network would be established and the waiting period would be reduced.
How to Use the Idea
- Buy Peloton Interactive shares at $113.
- Allocate no more than 2% of your portfolio amount. To build a balanced portfolio, you can use recommendations by our analysts.
- Sell the stock when the price is at $150 per share.
How to Buy Peloton Interactive?
If you don't have an investment account yet, open it now: this can be done online, in just 10 minutes. All you need to do is fill out a short form and verify your account.
After opening an account, you can buy shares in either of the following ways:
Freedom24 Web Platform: : In the Web Terminal section, type PTON.US (Peloton Interactive ticker in the NASDAQ) in the search box, and select Peloton Interactive in the results. Open a secure session in the trading window on the right, select the number of shares you want to buy, and click Buy.
Freedom24 iPhone or Android App: Go to the Price screen and tab the search icon in the top right corner. In the search dialog that will show up, type PTON.US (Peloton Interactive ticker in the NASDAQ) and select Peloton Interactive in the results. You will then see Акция Peloton Interactive stock in the market watch; tap it and go to the Order tab in the dialog that shows up. Specify the number of shares you want to buy and click Buy.
Buy Peloton Interactive shares: Invest into the rising online fitness demand!
Buy Peloton Interactive Shares >>
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