Peloton FOMO Pushes Stock to New High
Raymond James has a case of FOMO. The firm is jumping back into its coverage of Peloton with a price target of $65 and an OVERWEIGHT rating.
Competitive moat: Peloton’s first-mover advantage will provide the company with a significant edge over rivals, even though Connected Fitness is not a winner-takes-all battle. In addition to robust brand recognition, Raymond James analyst Aaron Kessler says “scale efficiencies and content costs will make it difficult for competitors to undercut Peloton on price.”
Deep pockets: It will be a tall task for challengers to match the size of Peloton’s investments in content, which fuel over 1,000 new videos a month, according to Kessler.
Fitness on a budget: Peloton casts a wide net that goes beyond consumers who are willing to spend a couple thousand dollars on exercise equipment. Kessler emphasizes that Peloton’s Digital app creates a low-priced option that will serve as a barrier to low-priced rivals, and also serves as a large funnel for new Connected Fitness subscribers. Stifel estimates that Peloton could report a total of 300,000 digital app-only subscribers in its next report.
Stickiness: Falling customer acquisition costs and low churn are also cited by Raymond James as support for its bullish stance. Switching from a Peloton bike to a SoulCycle bike is much more of a hassle than switching from Apple Music to Spotify. Stifel estimates monthly churn rates held closer to last quarter’s 0.46% rate rather than the 0.75% high-end forecast.
