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Peloton Says a Cheaper Treadmill Could Be a Rich Opportunity

By Rich Duprey – Updated Jul 16, 2020 at 10:06AM

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Rumors of less costly equipment have circulated for months.

Rumors of cheaper home fitness equipment from Peloton Interactive (PTON -1.70%) have gotten more of a workout from analysts than consumers working up a sweat on one of its pricey stationary bikes, but CFO Jill Woodworth says lower-cost equipment might finally be on the drawing board.

But rather than a full suite of products, Woodworth told analysts on a Barron's Investing in Tech call that there's really only one device Peloton is considering at the moment: a cheaper treadmill.

Man running on a Peloton connected treadmill.

Image source: Peloton Interactive.

Sweating the details

Despite the cost of its bikes and treadmills, Peloton is still seeing strong consumer demand for them. The $2,245 price for one of its connected bikes and the $4,295 cost for a connected treadmill hasn't deterred consumers from buying them: Sales surged more than 60% to $420 million last quarter.

But the market is not even, so although a cheap rowing machine would be a nice addition to its product lineup, Woodworth says the opportunity there is "much, much smaller than tread and boot camp," which Peloton says is 2 to 3 times the size of exercise bikes.

"If you think about our priorities, that is first and foremost on our minds," she told the analysts.

A new Peloton treadmill would still be pricey, as Woodworth suggested the cost would be in line with one of its bikes, but it would undoubtedly leverage the growth in connected subscribers to its fitness classes (which can be accessed without owning the equipment).

Segment revenue nearly doubled in the fiscal third quarter to $98 million, and it crossed the 1 million-subscriber threshold in May as the $13-per-month subscription plan really took hold. Although it's possible the class-only subscriptions could cannibalize the $39-per-month memberships that are attached to its equipment, Woodworth says Peloton views them as a "lead generation tool."

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Peloton Interactive. The Motley Fool has a disclosure policy.

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