Many of you know me as the long-term value investor buying undervalued stocks. As such, I have not been largely exposed to US quoted technology sector.
Why Peloton is different?
1. First and foremost, I have had them on the watchlist for a while now, as I love the business concept and the business model. I’ve always been into sports and have been pitching the importance of exercise whenever I possibly could. The idea of combining exercise and social interaction, also in the comfort of your home / garden – I think is a brilliant one.
2. I attended the first ever call with Investors on 15/09 and I was really impressed by the presentation, not only from the numbers perspective (have a look at some of the slides attached) but also from the leadership, vision, mission, clarity and ambitions perspective. To some extent, I’ve felt it’s the new Apple and I see a lot of comparisons, mainly from the go-to-market and marketing as well as branding strategies.
3. From value investment perspective, it is cheap if you believe even slightly in their ambitious goals. I’ve run multiples on all tech stocks on eToro and Peloton was very cheap at 80 when I was buying it 5 weeks ago. Now at over 130 it crossed the PT (Price Target) of AR (Analyst Recommendations) and thus we have to evaluate again. Having said that, we took amazing profit as it was nearly a 14% position at the beginning and is now “only 10%” with already increased price.
4. The other tech stocks that I liked were Wix and we actually had it around 250. Here the multiples are quite high, but I like the business and even more so than in the case of Peleton, I actually pay Wix quite a bit on subscription model (probably spend most on Apple products and services this way). That’s a wonderful business model, actually locking customers in for a long time, whether there is Covid or not. (I avoid all subscriptions as a plague due but am quite strongly locked in within Apple and Wix ecosystems).
5. Although the slides depict the numbers very well, let me cover ones that I like the most:
213% CAGR of total workouts. Let that number sink in. Financially speaking, this is absolutely humongous, but what is more – this is actually making it also a “socially responsible investment” (SRI). By investing in Peloton we are actually contributing to the improvement of health of our population.
36.500 of health clubs to be disrupted. I am passionate about disruptive innovation, something I learned directly from Prof. Clayton Christensen (may he RIP). Here we are entering a classic case where JBTD (Job to be Done) is fitness/health/gym/connection is drastically improved by Peleton.
100.000.000 subscribers. Big Audacious Goal.
c.$2000 is a great price tag. Again, think Apple. Again, think health.
4.300.000 Instagram followers across 34 instructor accounts. You may laugh at this, but I would not disregard it completely, given how big fitness is on social media and how positive the impact of social interaction is while working out and in generally, ESPECIALLY during Covid-19.
1.500.000 a year unit production capacity. I know it sounds too much like Tesla so let’s just park it here.
0.64% churn. That’s my favourite number of all actually. Unbelievable.
Let me know your thoughts, especially if you are the current bike/treadmill owner!
Very best regards,
MJ
Marcin Jasinski
Entrepreneur & CEO Advisor
+352 661 10 80 10
www.mjtheconsultant.com
Portfolio and Wealth Management
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