Peloton is Not a Fad, Holiday-like Demand to Continue for Several Quarters: Analyst
Photo Credit: Peloton press kit
Peloton is capitalizing on the confluence of shifting consumer behavior, gym closures, and social distancing, and could see holiday-like demand for several quarters, according to Stifel analyst Scott Devitt. The firm raised its price target for Peloton shares to $62 (from $55) and reiterated its BUY rating late Sunday night.
Subscriber surprise: Due to low churn rates, Stifel sees a possible beat on Connected Subscriber numbers when Peloton reports quarterly results. Devitt says in a recent note that he believes it is possible monthly churn rates held closer to last quarter’s 0.46% rate rather than the 0.75% high-end forecast (churn rate is the percentage at which customers stop subscribing to a service). Stifel doesn’t expect the upside to come from new product deliveries because order-to-delivery windows are still stuck at about eight weeks in major markets.
Digital Subscribers (App-only): In addition to Connected Fitness subscribers, Peloton also has an app-only subscription offering, which costs $13 a month. This serves as a key pipeline for conversions to Bike purchases and Connected Fitness subscriptions. Stifel estimates 10% of Digital subs are converted to Connected Fitness users, which means Peloton could report a total of 300,000 or more Digital subscribers in the next report. As of May 6, over 1.1 million people had signed up for the free trial, creating a large pool of potential conversions.
Gyms are losing muscle: The downsizing efforts by major gym chains is another catalyst for Peloton.
Gold’s Gym permanently shut down 30 locations in April and filed for Bankruptcy in May.
24 Hour Fitness filed for bankruptcy last week and plans to close 100 locations.
Peloton’s international opportunity: Stifel emphasizes that with exposure to the U.S., Canada, the UK, and Germany, Peloton reaches approximately 90 million of an estimated global 180 million gym members. The firm cites app data that suggests international daily download momentum has held up to date in June.
