I’m under the impression this stems from an early decision to handle logistics on their own. Pure speculation - but I assume they identified delivery and setup as part of the customer experience that needed improving over existing competitors, and ensuring customers received fully functional, completely installed trainers in the location they needed as a differentiator. Solution: we’ll use our own logistics. Great.
Except that really does not scale well internationally. Note that as part of the announcements, they are backing off from that dead end.
I can confirm that when XPO was doing most of the deliveries, the feedback was BRUTAL. My own personal experience was they had to reschedule twice, and then showed up at like 9pm, unloaded the bike, assembled it outside my home, IN THE RAIN, and then brought it inside. I know other people with similar horror stories from XPO. Parts installed backwards, too loose or too tight, etc.
I can see where P thought they needed to solve that FAST.
Yes to everything you say in the 1st paragraph! [It’s a bit of a repeat, but] Peloton brought a different level of user experience to the the indoor fitness market than had ever been seen before [at scale] and were expanding it vertically. [btw: My wife’s experience with their customer service department over the 5 years she has ridden her Peloton has been equally great].
The issue for international is slightly different. You can execute the same plan (vertical integration), it just takes a lot longer, has more complexities and can cost a lot more. Again, to my above comment about about employee growth rate, it is hard to appreciate the depth and breadth of challenges the leadership team was facing during this growth period to say that “they should have done X and not Y” from the outside.
Agreed. That sort of CAGR with hardware and logistics involved is a few orders of magnitude harder than “simply” delivering SaaS. Add in pandemic supply chain and logistics issues, and you’re in for a real nightmare.
I’m watching it closely. It’s such a trendy stock, that you could easily see 50% gains with a little traction. (Note, it’s one of many I’ve been watching as the market has been trending down. Spotify is another interesting one right now)
Quoting myself - probably bad form - Peloton is settling back to where it should be valued based on the intrinsics of its business model. At least my reading of the intrinsics of its business model.
There are two things to consider to answer your question:
Category Changer - When Peloton came on to the scene, and particularly after it went public and raised visibility of the company and product, it had created an entirely new market for quality indoor biking experience, in a similar way of what Apple had done with the iPhone 4 almost 20 years ago. The category now is well established, well understood with lots of players. So not much to follow in this regard excepting when Peloton introduces new products (as the category leader) and that of their competitors.
Stock - I (as well as many others) recognized the above long before the company went public (my wife has been a user since Feb 2017) so it was easy to see how most (including many TR users) did not understand the value proposition that Peloton was bringing to the market, hence the investment opportunity (Covid acceleration came later). Today, from a stock perspective, it is like any other tech company and whether you see the current stock situation as an opportunity or not depends on all of the typical analysis you’d use to assess the macro environment, an industry, the company, etc.
Stock market is down across the board but Peloton has really take a beating. Was as high as 167.42 in January 2021. Dropped to 11.25 a couple weeks ago which was lower than it had ever been. Dropped 93% in a little over a year. Wow
It’s not just Peloton or other listed companies. Lots of smaller concerns that went to remote training/activities during lockdowns have seen similar drops in revenue as people are no longer stuck at home wondering what to do.
Yes. And not the first time this has happened to a tech star (e.g. Sun Microsystems in 2001).
But from a stock price perspective, the real question is whether 13.55 (current price) a good buying opportunity or selling one? [btw: similar question was asked when the new CEO arrived]
I admit I am thinking about buying a bit if it hits $10. I’m sure I’m not alone. The question I keep asking myself is “will they just give up and sell the thing now that they’ve had their huge peak and will probably not see those numbers again before the NEXT BIG THING?”, and that will likely keep me from buying.
I read an interesting article on WSJ a couple days ago about how Peloton handled the pandemic versus some other brands who also saw demand skyrocket. It mentioned how Peloton started building a $100 million factory which they are now going to sell without ever using it. Wondering who will buy it?
The whole thing will make for an interesting topic discussion in business classes for years
So this goes back to why supply has been so slow to catch up with demand in the bike industry…most people in bike biz did not believe the boom was sustainable and opted not to invest heavily in added capacity. Sure, there was some production expansion, but a lot ws via extra production shifts, not physical additions.
The one thing the industry got “wrong” was that the bubble last WAY longer than anyone anticipated at first…but they are ultimately being proven correct re: sustained sales increases.
Again, this was foreseeable…but people got greedy and reasoned this was the “new normal”.
I agree with most of what you said, but I think the caveat here is that people were throwing money at Peloton and encouraging them to grow as quickly as possible, whereas I think most of these other companies couldn’t afford to expand that quickly even if they wanted to.
Yeah, no doubt…that definitely was a compounding problem…the reality is that a company such as peloton was never a good candidate for going public, outside of the short-term cash grab, IMO.
So you have investors flooding their coffers with $$ and people screaming “BUILD BUILD BUILD” and it all eventually bursts…but at some point, company leaders need to whoa the horses and provide strategic feedback. They simply failed to do so and got the short-term dollars, while not providing long-term stewardship for the company.
The question you need to ask yourself is whether this would be an “emotional buy” or based on some sound understanding/belief that the market doesn’t understand [regardless of the what the overall stock market is going to do which no one can predict with accuracy, particularly over the near term].
FWIW: When I first posted this thread in Sept '19 (almost 3 years ago), I had invested based on a belief that the market did not understand the value Peloton was bringing to the market (fundamentally changing the in-home fitness experience). After posting the thread and seeing how little TR users understood Peloton (e.g. equating it to BowFlex), I doubled down. Although I held too long (different story) and only made a decent profit, I have no insight today that would lead me believe I know anything more than others regarding a decision to buy or sell.
At $5B market cap, its still a substantial company only affordable by the major players. While the stock price is down dramatically, their subscriber #s are phenomenal (take a look at their recent annual report).
The new CEO is very experienced with likely huge board support for long term growth. So for the board to approve a sale and get sufficient shareholder approval would probably take a huge premium (e.g. $10B).
- Peloton is settling back to where it should be valued based on the intrinsics of its business model. At least my reading of the intrinsics of its business model.